updated 2/14/2011 4:18:35 PM ET 2011-02-14T21:18:35

NEW YORK, Feb. 14, 2011 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq:MERC) (TSX:MRI-U) today reported strong results for the fourth quarter and record results for the year ended December 31, 2010. Operating EBITDA in the fourth quarter of 2010 was €64.6 million ($87.8 million), compared to €23.5 million ($34.7 million) in the last quarter of 2009 and €65.5 million ($84.7 million) in the third quarter of 2010. In 2010, Operating EBITDA significantly increased fivefold to a record €224.0 million ($297.3 million) from €41.4 million ($57.7 million) in 2009. Operating EBITDA is defined on page 4 of this press release and reconciled to net income (loss) on page 8 of the financial tables in this press release.

We reported net income of €35.3 million ($48.0 million), or €0.84 ($1.14) per basic share, for the fourth quarter of 2010, compared to €2.7 million ($4.0 million), or €0.08 ($0.12) per basic share, in the last quarter of 2009 and €46.1 million ($59.6 million), or €1.17 ($1.51) per basic share, in the third quarter of 2010. For 2010, we reported net income of €86.3 million ($114.5 million), or €2.24 ($2.97) per basic share, compared to a net loss of €62.2 million ($86.7 million), or €1.71 ($2.38) per basic share, in 2009.

Summary Financial Highlights of the 2010 Fourth Quarter and Year End Results

  Q4 Q3 Q4 Year Year
   2010   2010   2009   2010    2009 
  (in millions of Euros, except where otherwise stated)
Pulp revenues € 232.2 € 224.7 € 154.9 € 856.3 € 577.3
Energy revenues  13.4  9.7  10.2  44.2  42.5
Operating income (loss)  50.4  51.4  9.8  167.7  (12.8)
Operating EBITDA (loss)  64.6  65.5  23.5  224.0  41.4
Unrealized gain (loss) on derivative instruments  12.4  0.5  5.1  1.9  (5.8)
Foreign exchange gain (loss) on debt  (1.5)  9.9  (1.8)  (6.1)  2.7
Income tax benefit (provision)  0.2  7.2  1.0  5.9  5.9
Net income (loss) attributable to common shareholders  35.3  46.1  2.7  86.3  (62.2)
Net income (loss) per share attributable to common shareholders          
Basic € 0.84 € 1.17 € 0.08 € 2.24 € (1.71)
Diluted € 0.63 € 0.82 € 0.07 € 1.56 € (1.71)
Common shares outstanding at period end (000s)  43,000  42,030  36,443  43,000  36,443

Summary Operating Highlights of the 2010 Fourth Quarter and Year End Results

  Q4 Q3 Q4 Year Year
   2010   2010   2009   2010    2009 
Pulp Production ('000 ADMTs)  356.2  380.9  356.9   1,426.3  1,397.4
Scheduled Production Downtime ('000 ADMTs)  –  8.3  14.0   43.5   52.1
Pulp Sales ('000 ADMTs)  386.0  344.8  351.8   1,428.6   1,445.5
NBSK pulp list price in Europe ($/ADMT)  957  980  787   938   667
NBSK pulp list price in Europe (€/ADMT)  704  758  533   707   478
Average pulp sales realizations (€/ADMT)  593  642  434   591   393
Energy Production ('000 MWh)  393.0  330.8  358.7   1,444.1  1,445.3
Energy Sales ('000 MWh)  149.7  119.1  116.0   520.0  478.7
Average Spot Currency Exchange Rates:          
€ / $(1)  0.7361  0.7729  0.6774   0.7541   0.7176
C$ / $(1)  1.0129   1.0385  1.0557   1.0298   1.1412
C$ / €(2)  1.3766  1.3438  1.5604   1.3671   1.5851
           
(1) Average Federal Reserve Bank of New York noon spot rate over the reporting period.
(2) Average Bank of Canada noon spot rate over the reporting period.

President's Comments

Mr. Jimmy S.H. Lee, President and Chairman, stated: "We are very pleased with the strong fourth quarter and overall yearly performance in 2010 as we achieved record annual pulp production and Operating EBITDA of €224.0 million. Fourth quarter Operating EBITDA of €64.6 million was down marginally from the record third quarter as a result of a slightly weaker U.S. dollar versus the Euro, extreme winter weather conditions in Germany and temporary equipment outages which negatively affected production at our German mills. Both the quarterly and yearly results reflect strong performances by all of our mills, including our Celgar mill which started to achieve our projected performance targets." 

Mr. Lee continued: "Overall, pulp prices in the fourth quarter of 2010 remained near historically high levels but were somewhat lower than the third quarter. At the end of 2010, list prices in Europe were approximately $950 per ADMT and in North America and China were approximately $960 and $840 per ADMT, respectively."

Mr. Lee continued: "We are pleased with the Celgar Green Energy Project, which was substantially completed at the end of the third quarter and generated €3.4 million in revenues in the fourth quarter. In the fourth quarter, we implemented customary equipment modifications to optimize energy generation to ensure the turbine performs as designed."

Mr. Lee added: "In the fourth quarter of 2010, we effectively extended the maturity of our senior unsecured indebtedness by purchasing and thereby cancelling $289.5 million in aggregate principal amount of our 9.25% senior notes due 2013 (the '2013 Notes') with the net proceeds of a private offering of $300 million in aggregate principal amount of 9.5% senior notes due 2017 and cash on hand. We will redeem the remaining $20.5 million of outstanding 2013 Notes on February 15, 2011."

Mr. Lee continued: "In the short term, pulp prices have increased by approximately $20 per ADMT in China in February 2011 and producers have announced an increase of $30 per ADMT in selected markets to take effect in March 2011. Additionally, based on the most recently published data, NBSK producer inventories are around 25 days which generally signals strong demand."

Mr. Lee concluded: "We are well positioned for a positive 2011. Our current short to medium-term pricing and demand outlook is positive. This, coupled with our world-class mills, should permit us to continue to enhance value for our stakeholders."

Three Months Ended December 31, 2010 Compared to Three Months Ended December 31, 2009

Pulp revenues for the three months ended December 31, 2010 increased by approximately 50% to €232.2 million from €154.9 million in the comparative period of 2009, due to higher pulp prices and a stronger U.S. dollar relative to the Euro. Revenues from the sale of excess energy increased by approximately 31% in the fourth quarter to €13.4 million from €10.2 million in the same quarter last year, primarily as a result of energy sales from the Celgar Green Energy Project in the fourth quarter of 2010.

Pulp production marginally decreased to 356,244 ADMTs in the current quarter, from 356,859 ADMTs in the same quarter of 2009, primarily due to extreme winter weather conditions in Germany and temporary equipment failures adversely affecting production at our German mills.

Pulp sales volume increased to 385,989 ADMTs in the current quarter from 351,797 ADMTs in the comparative period of 2009, primarily as a result of stronger demand. Average pulp sales realizations increased to €593 per ADMT in the fourth quarter of 2010, compared to €434 per ADMT in the same period last year, primarily due to higher pulp prices. 

Costs and expenses in the fourth quarter of 2010 increased to €195.2 million from €155.3 million in the comparative period of 2009, primarily due to higher fiber costs.

On average, our overall fiber costs in the current quarter increased by approximately 25% from the same period in 2009, primarily due to higher fiber costs at our German mills caused by lower levels of harvesting in central Germany, along with extreme winter weather conditions in the fourth quarter of 2010.

For the fourth quarter of 2010, operating income increased fivefold to €50.4 million from €9.8 million in the comparative quarter of 2009, primarily due to improved pulp prices.

Interest expense in the fourth quarter of 2010 increased to €16.5 million from €15.8 million in the comparative quarter of 2009, primarily due to accretion expense related to the exchange of our convertible notes, partially offset by reduced levels of debt associated with the Stendal mill.

Our Stendal mill recorded an unrealized gain of €12.4 million on our interest rate derivatives in the current quarter, compared to an unrealized gain of €5.1 million in the same quarter of last year. We recorded a foreign exchange loss on our debt of €1.5 million in the fourth quarter of 2010 compared to a loss of €1.8 million in the same period last year.

In the fourth quarter of 2010, the noncontrolling shareholder's interest in the Stendal mill's income was €3.5 million, compared to €1.3 million in the same quarter last year.

In the fourth quarter of 2010, Operating EBITDA increased by 175% to €64.6 million from €23.5 million in the fourth quarter of 2009. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Management uses Operating EBITDA as a benchmark measurement of its own operating results, and as a benchmark relative to its competitors. Management considers it to be a meaningful supplement to operating income as a performance measure primarily because depreciation expense and non-recurring capital asset impairment charges are not an actual cash cost, and depreciation expense varies widely from company to company in a manner that management considers largely independent of the underlying cost efficiency of their operating facilities. In addition, we believe Operating EBITDA is commonly used by securities analysts, investors and other interested parties to evaluate our financial performance.

Operating EBITDA does not reflect the impact of a number of items that affect our net income, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income or income from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. For a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA, see page 8 of the financial tables included in this press release.

During the quarter, we recorded approximately €0.2 million of income tax benefits, compared to €1.0 million in the same period last year. 

During the fourth quarter of 2010, we recorded a loss on the extinguishment of debt of €6.6 million, primarily in connection with the repurchase of our 2013 Notes. In the fourth quarter of 2009, we recorded a gain of €4.4 million on the extinguishment of our convertible notes.

We reported net income attributable to common shareholders of €35.3 million, or €0.84 per basic and €0.63 per diluted share, for the fourth quarter of 2010, which included aggregate net non-cash unrealized gains of €9.3 million, comprised of a non-cash gain of €12.4 million on the Stendal interest rate derivatives, a non-cash foreign exchange loss of €1.5 million on our debt and a non-cash loss in connection with the repurchase of our 2013 Notes. In the fourth quarter of 2009, we reported net income attributable to common shareholders of €2.7 million, or €0.08 per basic and €0.07 per diluted share, which included aggregate net non-cash unrealized gains of €7.7 million, comprised of a non-cash gain of €5.1 million on the Stendal interest rate derivatives, a non-cash foreign exchange loss of €1.8 million on our debt and a non-cash gain of €4.4 million on the extinguishment of our convertible notes.

Year Ended December 31, 2010 Compared to Year Ended December 31, 2009

Pulp revenues for the year ended December 31, 2010 increased by 48% to a record €856.3 million from €577.3 million in the year ended December 31, 2009, primarily due to significantly higher pulp prices in 2010 and a stronger U.S. dollar relative to the Euro. In 2010, revenues from the sale of excess energy increased by approximately 4% to €44.2 million from €42.5 million in 2009, due to increased energy sales at our Celgar mill, partially offset by reduced energy sales at our Rosenthal mill caused by 60 days of scheduled turbine maintenance.

Pulp production increased to a record level of 1,426,286 ADMTs in 2010, from 1,397,441 ADMTs in 2009 primarily as a result of overall strong operating performance at all our mills. We took a total of 31 and 43 days scheduled maintenance downtime at our mills in 2010 and 2009, respectively, and expect to take approximately 39 days in 2011.

Pulp sales volume decreased slightly to 1,428,638 ADMTs in 2010 compared to 1,445,461 ADMTs in 2009. Average pulp sales realizations increased by approximately 50% to €591 per ADMT in 2010 from €393 per ADMT in 2009 primarily due to significantly higher pulp prices.  

Costs and expenses in 2010 increased to €732.8 million from €632.6 million in 2009, primarily due to higher fiber costs.

Our overall fiber costs in 2010 increased by approximately 24% from the same period in 2009, primarily due to higher fiber costs in Germany resulting from lower harvesting levels, combined with increased demand for wood from the energy sector for heating and bio-energy purposes. Fiber costs at our Celgar mill increased marginally from the prior year.

For 2010, we recorded operating income of €167.7 million, compared to an operating loss of €12.8 million in 2009, primarily due to higher price realizations resulting from higher pulp prices.

Interest expense in 2010 increased to €67.6 million from €64.8 million in 2009, primarily due to accretion expense related to the exchange of our convertible notes, partially offset by reduced levels of debt associated with our Stendal mill.

Our Stendal mill recorded an unrealized gain of €1.9 million on its interest rate derivatives at the end of 2010, compared to an unrealized loss of €5.8 million last year due to a small increase in European interest rates. We recorded a foreign exchange loss on our debt of €6.1 million in 2010, compared to a gain of €2.7 million in 2009.

In 2010, the noncontrolling shareholder's interest in the Stendal mill's income was €8.5 million, compared to €9.9 million of the Stendal mill's loss last year.

In 2010, Operating EBITDA increased fivefold to €224.0 million from €41.4 million in 2009. For a definition of Operating EBITDA, see page 4 of this press release and for a reconciliation of net income to Operating EBITDA, see page 8 of the financial tables included in this press release.

During both 2010 and 2009, we recorded approximately €5.9 million of net tax recoveries. 

We recorded a loss on the extinguishment of debt of €7.5 million in 2010, primarily in connection with the repurchase of our 2013 Notes. In 2009, we recorded a gain of €4.4 million on the extinguishment of our convertible notes.

We reported net income attributable to common shareholders of €86.3 million, or €2.24 per basic and €1.56 per diluted share, for 2010, which included aggregate net non-cash unrealized losses of €0.5 million, comprised of a non-cash gain of €1.9 million on the Stendal interest rate derivatives, a non-cash foreign exchange loss of €6.1 million on our long-term debt, a non-cash loss on the extinguishment of our 2013 Notes and a non-cash income tax benefit. In 2009, we reported a net loss attributable to common shareholders of $62.2 million, or €1.71 per basic and diluted share, which included aggregate net non-cash unrealized gains of €7.5 million, comprised of a non-cash loss of €5.8 million on the Stendal interest rate derivatives, a non-cash foreign exchange gain of €2.7 million on our long-term debt, a non-cash gain of €4.4 million on the extinguishment of our convertible notes and a non-cash income tax benefit.

Liquidity and Capital Resources

The following table is a summary of selected financial information for the periods indicated:

    Years Ended December 31,
    2010    2009 
  (in thousands)
Financial Position    
Cash and cash equivalents  € 99,022  € 51,291
Working capital   231,683   99,150
Property, plant and equipment   846,767  868,558
Total assets  1,216,075  1,083,831
Long-term liabilities   877,315  896,074
Total equity   213,563  85,973

As at December 31, 2010, we had approximately €26.4 million and C$17.9 million available under our Rosenthal and Celgar facilities, respectively. As at December 31, 2010, approximately €500.7 million was outstanding under our Stendal mill's loan facility.

Restricted Group

The following table is a summary of selected financial information for the Restricted Group for the periods indicated.

    Years Ended December 31,
    2010    2009 
  (in thousands)
Restricted Group Financial Position    
Cash and cash equivalents  € 50,654  € 20,635
Working capital   150,667   57,015
Property, plant and equipment   362,274  362,311
Total assets   662,944  555,977
Long-term liabilities   312,631  301,173
Total equity   289,141  200,247

Earnings Release Call

In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Tuesday, February 15, 2011 at 10:00 AM (Eastern Standard Time). Listeners can access the conference call live and archived through March 15, 2011, over the Internet at http://investor.shareholder.com/media/eventdetail.cfmeventid=91422&CompanyID=MERC&e=1&mediaKey=1AE35D7DABC3ECD95E2779DA87354812  or through a link on the Company's News/Financial page at http://www.mercerint.com/s/NewsReleases.asp. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software. A replay of this call will be available approximately two hours after the live call ends until February 22, 2011 at 11:59 PM (Eastern Standard Time). The replay number is (800) 642-1687 for domestic callers or (706) 645-9291 for international callers, and the passcode is 38594483.

Mercer International Inc. is a global pulp manufacturing company. To obtain further information on the company, please visit its web site at http://www.mercerint.com.

The Mercer International Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=5417

The preceding includes forward looking statements which involve known and unknown risks and uncertainties which may cause our actual results in future periods to differ materially from forecasted results. Among those factors which could cause actual results to differ materially are the following: the highly cyclical nature of our business, raw material costs, our level of indebtedness, competition, foreign exchange and interest rate fluctuations, our use of derivatives, expenditures for capital projects, environmental regulation and compliance, disruptions to our production, market conditions and other risk factors listed from time to time in our SEC reports.

 
MERCER INTERNATIONAL INC.
 
CONSOLIDATED BALANCE SHEETS
(In thousands of Euros)
 
    December 31, 
    2010    2009 
ASSETS    
Current assets    
 Cash and cash equivalents  € 99,022  € 51,291
 Receivables   121,709   71,143
 Inventories   102,219  72,629
 Prepaid expenses and other   11,360   5,871
 Deferred income tax   22,570   –
Total current assets   356,880   200,934
Long-term assets    
 Property, plant and equipment   846,767  868,558
 Deferred note issuance and other   11,082   8,186
 Deferred income tax   –  3,426
 Note receivable   1,346   2,727
    859,195   882,897
Total assets  € 1,216,075  € 1,083,831
     
LIABILITIES    
Current liabilities    
 Accounts payable and accrued expenses  € 84,873  € 85,185
 Pension and other post-retirement benefit obligations   728  567
 Debt   39,596   16,032
Total current liabilities   125,197   101,784
Long-term liabilities    
 Debt   782,328  813,142
 Unrealized interest rate derivative losses   50,973  52,873
 Pension and other post-retirement benefit obligations   24,236  17,902
 Capital leases and other   12,010  12,157
 Deferred income tax   7,768   –
    877,315   896,074
Total liabilities   1,002,512   997,858
     
EQUITY    
Shareholders' equity    
 Share capital   219,211  202,844
 Paid-in capital   (3,899)  (6,082)
 Retained earnings (deficit)   (10,956)  (97,235)
 Accumulated other comprehensive income (loss)   31,712   23,695
Total shareholders' equity   236,068   123,222
     
Noncontrolling interest (deficit)  € (22,505)  € (37,249)
Total equity   213,563   85,973
Total liabilities and equity  € 1,216,075  € 1,083,831
     
(1)
 
MERCER INTERNATIONAL INC.
 
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands of Euros, except per share data)
 
  Three Months Ended

 December 31, 
Years Ended

 December 31, 
   2010   2009   2010    2009 
         
Revenues        
 Pulp € 232,200 € 154,886 € 856,311  € 577,298
 Energy  13,442  10,226  44,225   42,501
   245,642  165,112  900,536  619,799
Costs and expenses        
 Operating costs  172,552  134,185  643,529  551,781
 Operating depreciation and amortization  14,115  13,594  55,932   53,919
   58,975  17,333  201,075   14,099
 Selling, general and administrative expenses  8,498  7,617  33,442  27,414
 Purchase (sale) of emission allowances  57  (127)  (110)   (516)
Operating income (loss)  50,420  9,843  167,743   (12,799)
         
Other income (expense)        
 Interest expense  (16,480)  (15,817)  (67,621)  (64,770)
 Investment income (loss)  164  1,240  468  (1,804)
 Foreign exchange gain (loss) on debt  (1,451)  (1,841)  (6,126)  2,692
 Gain (loss) on extinguishment of debt  (6,565)  4,447  (7,494)  4,447
 Gain (loss) on derivative instruments  12,422  5,129  1,899  (5,760)
Total other income (expense)  (11,910)  (6,842)  (78,874)  (65,195)
Income (loss) before income taxes  38,510  3,001  88,869  (77,994)
Income tax benefit (provision) – current  (131)  (7)  (3,881)  (134)
                                            – deferred  378  1,014  9,760  6,003
Net income (loss)  38,757  4,008  94,748  (72,125)
Less: net loss (income) attributable to noncontrolling interest  (3,468)  (1,259)  (8,469)  9,936
Net income (loss) attributable to common shareholders € 35,289 € 2,749 € 86,279 € (62,189)
         
Retained earnings (deficit), beginning of period  (46,245)  (99,984)  (97,235)  (35,046)
Retained earnings (deficit), end of period € (10,956) € (97,235) € (10,956) € (97,235)
         
Net income (loss) per share attributable to common shareholders        
 Basic  € 0.84 € 0.08 € 2.24 € (1.71)
 Diluted € 0.63 € 0.07 € 1.56 € (1.71)
 
(2)
 
MERCER INTERNATIONAL INC.
 
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of Euros)
 
    For the Years Ended December 31, 
    2010    2009    2008 
Cash flows from (used in) operating activities      
Net income (loss) attributable to common shareholders  € 86,279  € (62,189)  € (72,465)
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities      
 Loss (gain) on derivative instruments  (1,899)  5,760  25,228
 Foreign exchange (gain) loss on debt  6,126  (2,692)  4,234
 Loss (gain) on extinguishment of debt  7,494  (4,447)  –
 Depreciation and amortization  56,231  54,170  55,762
 Accretion expense (income)  2,492  181  –
 Noncontrolling interest  8,469  (9,936)  (13,075)
 Deferred income taxes  (9,760)  (6,003)  1,976
 Stock compensation expense  2,394  455  264
 Pension and other post-retirement expense, net of funding  418  282  (758)
 Inventory provisions   –   –  11,272
 Other   5,190   2,482  3,025
Changes in current assets and liabilities      
 Receivables  (40,038)  31,907  (14,811)
 Inventories   (24,462)   32,158  (13,331)
 Accounts payable and accrued expenses  (3,089)  (2,950)  (1,091)
 Other   (4,566)   (1,859)   1,904
 Net cash from (used in) operating activities  91,279  37,319  (11,866)
       
Cash flows from (used in) investing activities      
Purchase of property, plant and equipment  (38,300)  (28,828)  (25,704)
Proceeds on sale of property, plant and equipment  1,138  436  2,000
Cash, restricted  –  13,000  20,000
Note receivable   1,113   152   5,708
 Net cash from (used in) investing activities  (36,049)  (15,240)  2,004
       
Cash flows from (used in) financing activities      
Repayment of notes payable and debt  (234,598)  (26,499)  (34,023)
Repayment of capital lease obligations  (2,920)  (3,178)  (3,312)
Proceeds from borrowings of notes payable and debt   222,193   13,511   –
Proceeds from (repayment of) credit facilities, net  (2,660)  (4,272)  5,837
Proceeds from government grants  17,952  9,058  266
Payment of deferred note issuance costs   (6,095)   (1,969)   –
 Net cash from (used in) financing activities  (6,128)  (13,349)  (31,232)
Effect of exchange rate changes on cash and cash equivalents   (1,371)   109   (1,302)
       
Net increase (decrease) in cash and cash equivalents  47,731  8,839  (42,396)
Cash and cash equivalents, beginning of period   51,291   42,452   84,848
Cash and cash equivalents, end of period  € 99,022  € 51,291  € 42,452
       
(3)
 
MERCER INTERNATIONAL INC.
 
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(In thousands of Euros)
 
The terms of the indentures governing our 9.25% senior unsecured notes and our 9.5% senior unsecured notes require that we provide the results of operations and financial condition of Mercer International Inc. and our restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group". As at and during the three months and years ended December 31, 2010 and 2009, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills. The Restricted Group excludes the Stendal mill.
 
   December 31, 2010 
 

 
Restricted

 Group 
Unrestricted

Subsidiaries
 

Eliminations
Consolidated

 Group 
ASSETS

Current
       
Cash and cash equivalents € 50,654 € 48,368 € – € 99,022
Receivables  70,865   50,844   –   121,709
Inventories  60,910   41,309   –   102,219
Prepaid expenses and other  6,840   4,520   –   11,360
Deferred income tax  22,570   –   –   22,570
Total current assets  211,839   145,041   –   356,880
Long-term assets        
Property, plant and equipment  362,274   484,493   –   846,767
Deferred note issuance and other  6,903   4,179   –   11,082
Deferred income tax  –   –   –   –
Due from unrestricted group  80,582   –   (80,582)   –
Note receivable  1,346   –   –   1,346
Total assets € 662,944  € 633,713  € (80,582)  € 1,216,075
         
LIABILITIES

Current liabilities
       
Accounts payable and accrued expenses € 44,015 € 40,858 € – € 84,873
Pension and other post-retirement benefit obligations  728   –   –   728
Debt  16,429   23,167   –   39,596
Total current liabilities  61,172   64,025   –   125,197
Long-term liabilities        
Debt  273,473   508,855   –   782,328
Due to restricted group  –   80,582   (80,582)   –
Unrealized interest rate derivative losses  –   50,973   –   50,973
Pension and other post-retirement benefit obligations  24,236   –   –   24,236
Capital leases and other  7,154   4,856   –   12,010
Deferred income tax  7,768   –   –   7,768
Total liabilities  373,803   709,291   (80,582)   1,002,512
         
EQUITY

Total shareholders' equity (deficit)
 

 289,141
 

  (53,073)
 

  –
 

  236,068
Noncontrolling interest (deficit)  –   (22,505)   –   (22,505)
Total liabilities and equity € 662,944  € 633,713  € (80,582)  € 1,216,075
 
(4)
 
MERCER INTERNATIONAL INC.
 
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(In thousands of Euros)
 
   December 31, 2009 
 

 
Restricted

 Group 
Unrestricted

Subsidiaries
 

Eliminations
Consolidated

 Group 
         
ASSETS

Current
       
Cash and cash equivalents € 20,635 € 30,656 € – € 51,291
Receivables  34,588  36,555  –  71,143
Inventories  52,897  19,732  –  72,629
Prepaid expenses and other  3,452  2,419  –  5,871
Total current assets  111,572  89,362  –  200,934
Long-term assets        
Property, plant and equipment  362,311  506,247  –  868,558
Deferred note issuance and other  3,388  4,798  –  8,186
Deferred income tax  3,426  –  –  3,426
Due from unrestricted group  72,553  –  (72,553)  –
Note receivable  2,727  –  –  2,727
Total assets € 555,977 € 600,407 € (72,553) € 1,083,831
         
LIABILITIES

Current liabilities
       
Accounts payable and accrued expenses € 51,875 € 33,310 € – € 85,185
Pension and other post-retirement benefit obligations  567  –  –  567
Debt  2,115  13,917  –  16,032
Total current liabilities  54,557  47,227  –  101,784
Long-term liabilities        
Debt  276,604  536,538  –  813,142
Due to restricted group  –  72,553  (72,553)  –
Unrealized interest rate derivative losses  –  52,873  –  52,873
Pension and other post-retirement benefit obligations  17,902  –  –  17,902
Capital leases and other  6,667  5,490  –  12,157
Total liabilities  355,730  714,681  (72,553)  997,858
         
EQUITY

Total shareholders' equity (deficit)
 

 200,247
 

 (77,025)
 

 –
 

 123,222
Noncontrolling interest (deficit)  –  (37,249)  –  (37,249)
Total liabilities and equity € 555,977 € 600,407 € (72,553) € 1,083,831
 
(5)
MERCER INTERNATIONAL INC.
   
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations

 
(In thousands of Euros)

 
   
    Three Months Ended December 31, 2010 
 

 
Restricted

 Group 
Unrestricted

Subsidiaries
 

Eliminations
Consolidated

 Group 
Revenues        
 Pulp € 135,245 € 96,955 € – € 232,200
 Energy  6,395  7,047  –  13,442
   141,640  104,002  –  245,642
Operating costs  92,209  80,343  –  172,552
Operating depreciation and amortization  7,616  6,499  –  14,115
Selling, general and administrative expenses and other  5,439  3,116  –  8,555
   105,264  89,958  –  195,222
 Operating income (loss)  36,376  14,044  –  50,420
Other income (expense)

    Interest expense
 

 (7,425)
 

 (10,259)
 

 1,204
 

 (16,480)
 Investment income (loss)  1,333  35  (1,204)  164
 Foreign exchange gain (loss) on debt  (1,451)  –  –  (1,451)
 Gain (loss) on extinguishment of debt  (6,565)  –  –  (6,565)
 Gain (loss) on derivative instruments  –  12,422  –  12,422
 Total other income (expense)  (14,108)  2,198  –  (11,910)
 Income (loss) before income taxes  22,268  16,242  –  38,510
Income tax benefit (provision)  297  (50)  –  247
Net income (loss)  22,565  16,192  –  38,757
Less: net (income) loss attributable to noncontrolling interest  –  (3,468)  –  (3,468)
Net income (loss) attributable to common shareholders € 22,565 € 12,724 € – € 35,289
   
    Three Months Ended December 31, 2009 
 

 
Restricted

 Group 
Unrestricted

Subsidiaries
 

Eliminations
Consolidated

 Group 
Revenues        
 Pulp € 87,776 € 67,110  € – € 154,886
 Energy  4,021  6,205   –  10,226
   91,797  73,315   –  165,112
Operating costs  79,665  54,520  –  134,185
Operating depreciation and amortization  7,045  6,549  –  13,594
Selling, general and administrative expenses and other  4,384  3,106   –  7,490
   91,094  64,175   –  155,269
 Operating income (loss)  703  9,140   –  9,843
Other income (expense)

    Interest expense
 

 (6,576)
 

 (10,389)
 

 1,148
 

 (15,817)
 Investment income (loss)  1,740  648  (1,148)  1,240
 Foreign exchange gain (loss) on debt  (1,841)  –  –  (1,841)
 Gain (loss) on extinguishment of debt  4,447  –  –  4,447
 Gain (loss) on derivative instruments  –  5,129   –  5,129
 Total other income (expense)  (2,230)  (4,612)   –  (6,842)
 Income (loss) before income taxes  (1,527)  4,528  –  3,001
Income tax benefit (provision)  1,016  (9)   –  1,007
Net income (loss)  (511)  4,519  –  4,008
Less: net (income) loss attributable to noncontrolling interest  –  (1,259)   –  (1,259)
Net income (loss) attributable to common shareholders € (511) € 3,260  € – € 2,749
         
(6)


 
MERCER INTERNATIONAL INC.
 
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(In thousands of Euros)
 
   Year Ended December 31, 2010 
 

 
Restricted

 Group 
Unrestricted

Subsidiaries
 

Eliminations
Consolidated

 Group 
Revenues        
 Pulp € 490,020  € 366,291  € – € 856,311
 Energy  15,145   29,080   –  44,225
   505,165   395,371   –  900,536
Operating costs  361,272   282,257   –  643,529
Operating depreciation and amortization  29,971   25,961   –  55,932
Selling, general and administrative expenses and other  20,231   13,101   –  33,332
   411,474   321,319   –  732,793
 Operating income (loss)  93,691   74,052   –  167,743
Other income (expense)

    Interest expense
 

 (31,498)
 

  (40,852)
 

  4,729
 

 (67,621)
 Investment income (loss)  5,103   94   (4,729)  468
 Foreign exchange gain (loss) on debt  (6,126)   –   –  (6,126)
 Gain (loss) on extinguishment of debt  (7,494)   –   –  (7,494)
 Gain (loss) on derivative instruments  –   1,899   –  1,899
 Total other income (expense)  (40,015)   (38,859)   –  (78,874)
     Income (loss) before income taxes  53,676   35,193   –  88,869
Income tax benefit (provision)  8,651   (2,772)   –  5,879
Net income (loss)  62,327   32,421   –  94,748
Less: net (income) loss attributable to noncontrolling interest  –   (8,469)   –  (8,469)
Net income (loss) attributable to common shareholders € 62,327  € 23,952  € – € 86,279
   
   Year Ended December 31, 2009 
 

 
Restricted

 Group 
Unrestricted

Subsidiaries
 

Eliminations
Consolidated

 Group 
Revenues        
 Pulp € 318,448 € 258,850  € – € 577,298
 Energy  15,183  27,318  –  42,501
   333,631  286,168  –  619,799
Operating costs  312,029  239,752  –  551,781
Operating depreciation and amortization  27,453  26,466  –  53,919
Selling, general and administrative expenses and other  15,049  11,849  –  26,898
   354,531  278,067   –  632,598
 Operating income (loss)  (20,900)  8,101   –  (12,799)
Other income (expense)

    Interest expense
 

 (27,351)
 

 (41,932)
 

 4,513
 

 (64,770)
 Investment income (loss)  5,002  (2,293)  (4,513)  (1,804)
 Foreign exchange gain (loss) on debt  2,692  –  –  2,692
 Gain (loss) on extinguishment of debt  4,447  –  –  4,447
 Gain (loss) on derivative instruments  –  (5,760)  –  (5,760)
 Total other income (expense)  (15,210)  (49,985)   –  (65,195)
 Income (loss) before income taxes  (36,110)  (41,884)  –  (77,994)
Income tax benefit (provision)  183  5,686   –  5,869
Net income (loss)  (35,927)  (36,198)  –  (72,125)
Less: net (income) loss attributable to noncontrolling interest  –  9,936   –  9,936
Net income (loss) attributable to common shareholders € (35,927) € (26,262)  € – € (62,189)
 
(7)
 
MERCER INTERNATIONAL INC.
 
COMPUTATION OF OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
 
 

 
Three Months Ended

 December 31, 
Year Ended

  December 31, 
   2010   2009   2010   2009 
Net income (loss) attributable to common shareholders € 35,289 € 2,749 € 86,279 € (62,189)
Net income (loss) attributable to noncontrolling interest  3,468  1,259  8,469  (9,936)
Income taxes (benefits)  (247)  (1,007)  (5,879)  (5,869)
Interest expense  16,480  15,817  67,621  64,770
Investment (income) loss  (164)  (1,240)  (468)  1,804
Foreign exchange (gain) loss on debt  1,451  1,841  6,126  (2,692)
Loss (gain) on extinguishment of debt  6,565  (4,447)  7,494  (4,447)
Loss (gain) on derivative instruments  (12,422)  (5,129)  (1,899)  5,760
Operating income (loss)  50,420  9,843  167,743  (12,799)
Add: Depreciation and amortization  14,179  13,652  56,231  54,170
Operating EBITDA(1) € 64,599 € 23,495 € 223,974 € 41,371
         
(1) Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, and should not be considered as an alternative to net income (loss) attributable to common shareholders or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
 
COMPUTATION OF RESTRICTED GROUP OPERATING EBITDA
(Unaudited)
(In thousands of Euros)
 
 

 
Three Months Ended

 December 31, 
Year Ended

  December 31, 
   2010   2009   2010   2009 
Restricted Group        
Net income (loss) attributable to common shareholders(1) € 22,565 € (511) € 62,327 € (35,927)
Income taxes (benefits)   (297)  (1,016)  (8,651)  (183)
Interest expense  7,425  6,576  31,498  27,351
Investment (income) loss  (1,333)  (1,740)  (5,103)  (5,002)
Foreign exchange (gain) loss on debt  1,451  1,841  6,126  (2,692)
Loss (gain) on extinguishment of debt  6,565  (4,447)  7,494  (4,447)
Operating income (loss)  36,376  703  93,691  (20,900)
Add: Depreciation and amortization  7,680  7,103  30,270  27,704
Operating EBITDA(2) € 44,056 € 7,806 € 123,961 € 6,804
         
(1) For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same.

 
(2) Operating EBITDA does not reflect the impact of a number of items that affect our net income (loss) attributable to common shareholders, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States, and should not be considered as an alternative to net income (loss) attributable to common shareholders or income (loss) from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. Operating EBITDA has significant limitations as an analytical tool, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP.
 
(8)
CONTACT: Jimmy S.H. Lee
         Chairman & President
         (604) 684-1099
         
         David M. Gandossi
         Executive Vice-President &
         Chief Financial Officer
         (604) 684-1099
         
         FD
         Investors/Media: Eric Boyriven, Alexandra Tramont
         (212) 850-5600

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