NEW YORK, Feb. 26 /PRNewswire-FirstCall/ -- Mercer International
Inc. (Nasdaq: MERC; TSX: MRI.U) today reported results for the
fourth quarter and year ended December 31, 2006. In 2006, we
divested our paper mills and, pursuant to SFAS 144, account for
this business as discontinued operations and its results are
reported separately as discontinued operations. As a result,
previously reported amounts have been reclassified to conform to
the current presentation. Except as otherwise noted, the following
discussion relates to our continuing operations. Highlights of the
2006 Fourth Quarter -- Revenues increased by 30.5% to euro 160.5
million from euro 123.0 million in the comparative quarter of 2005,
primarily due to higher pulp prices and sales volumes from our
Stendal and Celgar pulp mills. -- Operating EBITDA increased to
euro 50.2 million in the fourth quarter from euro 13.1 million in
the comparative quarter of 2005. For a definition of Operating
EBITDA, see page 5 of this press release and for a reconciliation
of net income (loss) to Operating EBITDA, see page 8 of the
financial tables included in this press release. -- Pulp markets
continued to strengthen. Average list prices for NBSK pulp in
Europe were $730 per ADMT in the fourth quarter of 2006, $710 per
ADMT in the third quarter of 2006 and $600 per ADMT in the fourth
quarter of 2005. -- In December 2006, we curtailed production of
approximately 20,000 ADMTs of pulp at our German pulp mills because
of fiber supply imbalances. -- We recorded a net gain on our
outstanding derivatives of euro 34.8 million and a loss of euro 1.5
million in the fourth quarter of 2006 and 2005, respectively. -- We
had net income of euro 28.6 million, or euro 0.85 per basic and
euro 0.66 per diluted share, in the current quarter, compared to a
net loss of euro 27.2 million, or euro 0.82 per basic and diluted
share, in the same period of 2005. Highlights of 2006 -- Revenues
in 2006 increased by approximately 38% to euro 624.0 million from
euro 452.4 million in 2005, primarily as a result of higher pulp
prices and increased sales volumes at our Stendal and Celgar mills.
-- Operating EBITDA increased by 112% to euro 148.3 million in 2006
from euro 69.8 million in 2005 reflecting higher pulp sales. For a
definition of Operating EBITDA, see page 5 of this press release
and for a reconciliation of net income (loss) to Operating EBITDA,
see page 8 of the financial tables included in this press release.
-- Pulp markets strengthened throughout 2006. Average list prices
for NBSK pulp in Europe were $680 per ADMT in 2006, compared to
$610 per ADMT in 2005. -- Net realized and unrealized non-cash
holding gains were euro 105.8 million on our outstanding foreign
currency derivatives at the end of 2006, compared to a net realized
and unrealized non-cash holding loss of euro 71.8 million in 2005.
-- Net income increased to euro 69.2 million, or euro 2.08 per
basic and euro 1.72 per diluted share, in 2006, compared to a net
loss of euro 112.1 million, or euro 3.59 per basic and diluted
share, in 2005. President's Comments Mr. Jimmy S.H. Lee, President
and Chairman, stated: "During the fourth quarter of 2006: -- Our
strong results reflect strengthening pulp markets. Currently, list
NBSK prices per tonne are approximately $760 to $770 in Europe,
$790 in the United States and $730 to $760 in Asia, depending upon
the country of delivery. These price improvements are being
partially offset by upward pressure on fiber prices. -- Our results
were impacted by production curtailments of 20,000 ADMTs at our
German mills." Mr. Lee continued: "The recent storms in central
Europe in January 2007 have reportedly caused the downfall of over
40 million cubic meters of wood. This wood will have to be
harvested and processed in a timely manner. We expect this to
markedly increase the fiber availability to our German mills and
temper or lower fiber prices in central Europe during the second
half of 2007." Mr. Lee added: "Further to our objective of building
a focused and profitable pulp company, in 2006 we increased our
exposure to NBSK pulp by acquiring a further approximate 7%
interest in the Stendal mill and disposing of all of our paper
operations." Mr. Lee concluded: "Looking forward to 2007, we expect
the current strength in pulp markets to continue. All of our mills
are running well and, in the second quarter, we will complete and
tie in the C$28.0 million capital project at the Celgar mill.
Further, we are now currently expecting a better fiber outlook in
Germany. As a result, with our large, modern and efficient pulp
mills, we are well positioned to continue providing solid results
for our stakeholders." Summary Selected Highlights Q4 Q3 YTD Q4 YTD
2006 2006 2006 2005 2005 (in millions of Euro, except where
otherwise stated) Revenues euro 160.5 euro 171.2 euro 624.0 euro
123.0 euro 452.4 Sales of emission allowances 2.4 - 15.6 4.9 17.3
Income from operations 36.2 34.7 92.5 0.3 18.7 Operating EBITDA(1)
50.2 48.2 148.3 13.1 69.8 Realized gain (loss) on derivative
instruments 1.7 - (3.5) - (2.5) Interest expense 23.2 23.1 91.9
23.4 86.3 Unrealized gain (loss) on derivative instruments 33.1
(14.5) 109.4 (1.5) (69.3) Unrealized foreign exchange gain (loss)
on debt 3.8 (1.6) 15.2 (2.6) (4.2) Net income (loss) from
continuing operations 28.6 6.1 69.2 (27.2) (112.1) Income (loss)
per share from continuing operations Basic euro 0.85 euro 0.19 euro
2.08 euro (0.82) euro (3.59) Diluted euro 0.66 euro 0.14 euro 1.72
euro (0.82) euro (3.59) (1) For a definition of Operating EBITDA,
see page 5 of this press release and for a reconciliation of net
income (loss) to Operating EBITDA, see page 8 of the financial
tables included in this press release. Q4 Q3 YTD Q4 YTD 2006 2006
2006 2005 2005 Production ('000 tonnes) Total pulp production 328.9
347.2 1,302.3 296.3 1,184.6 Sales ('000 tonnes) Total pulp sales
volume(1) 344.4 338.2 1,326.4 291.0 1,101.3 NBSK list price in
Europe (US$/ADMT) 730 710 680 600 610 Mill net pulp price
realizations (euro/ADMT)(2) 480 482 465 458 407 (1) Excluding
intercompany pulp sales volumes of 603 ADMTs in Q4 2006, 2,774
ADMTs in Q3 2006, 13,234 ADMTs in YTD 2006, 3,638 ADMTs in Q4 2005
and 14,289 ADMTs in YTD 2005, respectively. (2) Excluding revenues
from third party transportation activities. Results of Operations -
2006 Fourth Quarter Revenues for the three months ended December
31, 2006 increased to euro 160.5 million from euro 123.0 million in
the comparative period of 2005, primarily due to higher pulp prices
and sales volumes. List prices for NBSK pulp in Europe were
approximately euro 553 ($730) per ADMT in the fourth quarter of
2006, compared to approximately euro 506 ($600) per ADMT in the
comparative period of last year. Mill net pulp sales realizations
increased to euro 480 per ADMT on average in the fourth quarter of
2006 from euro 458 per ADMT in the fourth quarter of 2005,
primarily as a result of higher prices. Cost of sales and general,
administrative and other operating expenses decreased to euro 126.7
million in the fourth quarter of 2006 from euro 127.7 million in
the comparative period of 2005, primarily as a result of a reversal
of accruals for wastewater fees of euro 13.0 million. In 2006,
German authorities confirmed that certain initiatives and capital
expenditures undertaken by us qualified to offset such fees. Fiber
costs at our German pulp mills increased significantly in the
fourth quarter of 2006 versus the same quarter of 2005 as a result
of supply imbalances and increased demand for wood residuals from
alternative or renewable energy producers. These factors
contributed to upward pressure on fiber prices in the quarter and
for fiber deliveries into the start of 2007. Severe winter storms
in central Europe in January 2007, which caused significant damage
to the forests, are expected to increase fiber supply and to temper
and moderate fiber prices in the second half of 2007. In the fourth
quarter of 2006, fiber costs at our Celgar mill increased
significantly compared to the same quarter of 2005, primarily
because of fluctuations in regional woodchip availability caused by
slumping North American lumber markets. For the fourth quarter of
2006, income from operations increased to euro 36.2 million from
euro 0.3 million in the comparative quarter of 2005, primarily as a
result of overall higher pulp prices and sales volumes and improved
productivity at our Stendal and Celgar mills. Derivative
Instruments In the fourth quarter of 2006, we recorded a net
realized gain before minority interest of euro 1.7 million on the
settlement of certain of Stendal's currency swaps and an unrealized
non-cash holding gain of euro 33.1 million before minority interest
upon the marked to market valuation of Stendal's outstanding
derivatives. In the comparative quarter of 2005, we recorded a net
realized and unrealized non-cash holding loss of euro 1.5 million
before minority interests upon the marked to market valuation of
our outstanding derivatives. Earnings Per Share and Operating
EBITDA We generated "Operating EBITDA" of euro 50.2 million and
euro 13.1 million in the three months ended December 31, 2006 and
2005, respectively. Operating EBITDA is defined as income (loss)
from continuing 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 income
(loss) to Operating EBITDA, see page 8 of the financial tables
included in this press release. We reported net income from
continuing operations for the fourth quarter of 2006 of euro 28.6
million, or euro 0.85 per basic and euro 0.66 per diluted share,
which included an aggregate of euro 36.9 million of unrealized
gains on our outstanding derivatives, a foreign exchange loss on
our long-term debt and a contribution to income of euro 13.0
million from reversing accruals for wastewater fees. In the fourth
quarter of 2005, we reported a net loss of euro 27.2 million, or
euro 0.82 per basic and diluted share, which reflected the
inclusion of interest expense of euro 16.1 million related to our
Stendal mill and the net realized and unrealized loss of euro 1.5
million on our interest rate and currency derivatives and the
unrealized non-cash foreign exchange loss of euro 2.6 million on
our long-term debt. During the fourth quarter of 2006, net income
including discontinued operations was euro 21.5 million, or euro
0.63 per basic and euro 0.50 per diluted share. In 2005, the net
loss in the fourth quarter including discontinued operations was
euro 29.8 million, or euro 0.90 per basic and diluted share.
Discontinued Operations Revenues from our discontinued operations
in the current quarter decreased to euro 9.0 million from euro 14.5
million in the same period of 2005. For the fourth quarter of 2006,
our discontinued operations generated an operating gain of euro 0.2
million, compared to an operating loss of euro 0.1 million in the
fourth quarter of 2005. Results of Operations - 2006 Revenues for
the year ended December 31, 2006 increased by approximately 38% to
euro 624.0 million from euro 452.4 million in 2005, primarily as a
result of higher pulp prices and sales volumes at our Stendal and
Celgar mills. List prices for NBSK pulp in Europe were
approximately euro 542 ($680) per ADMT in 2006, compared to
approximately euro 490 ($610) per ADMT in 2005. Mill net pulp sales
realizations increased to euro 465 per ADMT on average in the year
ended December 31, 2006 from euro 407 per ADMT in 2005, primarily
as a result of higher pulp prices. Cost of sales and general,
administrative and other expenses for the pulp operations increased
to euro 531.5 million in 2006 from euro 433.8 million in 2005,
primarily as a result of higher sales volumes, partially offset by
a reversal of accruals for wastewater fees of euro 13.0 million.
Beginning in 2005, our German operations became subject to the
European Union Emissions Trading Scheme, pursuant to which our
German pulp mills were granted emission allowances. In 2006 and
2005, we recorded a contribution to income from operations of euro
15.6 million and euro 17.3 million, respectively, resulting from
the sale of emission allowances. Fiber costs at our German pulp
mills increased by approximately 12% in 2006 versus 2005 as a
result of both a supply imbalance from low harvest levels during
the severe conditions in the prior winter harvesting seasons and
increased demand for wood residuals from alternative or renewable
energy producers. In 2006, fiber costs at our Celgar mill increased
by approximately 10% versus 2005, primarily because of fluctuations
in regional woodchip availability caused by slumping North American
lumber markets. In 2006, our operating income increased almost
fourfold to euro 92.5 million from euro 18.7 million in 2005,
primarily as a result of overall higher pulp prices and sales
volumes and improved productivity at our Stendal and Celgar mills.
Interest expense in 2006 increased to euro 91.9 million from euro
86.3 million in the year ago period because of the inclusion of a
full year's interest on our senior notes issued in February 2005
and euro 2.1 million of interest expense recorded on the purchase
of $15.2 million principal amount of our convertible notes.
Derivative Instruments and Minority Interest We recorded a net
realized and unrealized non-cash holding gain of euro 105.8 million
before minority interests upon the marked to market valuation of
our outstanding foreign currency derivatives at the end of 2006,
compared to a net realized and unrealized non-cash holding loss of
euro 71.8 million before minority interests upon the marked to
market valuation of our outstanding derivatives in 2005. In 2006,
minority interest, representing the minority shareholder's
proportionate interest in the Stendal mill, was euro 1.1 million of
the current year earnings, compared to euro 17.7 million of the
loss in 2005. Earnings Per Share and Operating EBITDA We generated
"Operating EBITDA" of euro 148.3 million and euro 69.8 million in
the year ended December 31, 2006 and 2005, respectively. For a
definition of Operating EBITDA, see page 5 of this press release
and for a reconciliation of net income (loss) to Operating EBITDA,
see page 8 of the financial tables included in this press release.
We reported net income for the year ended December 31, 2006 of euro
69.2 million, or euro 2.08 per basic and euro 1.72 per diluted
share, which reflected higher pulp prices, generally stronger pulp
markets and the net gains on our currency and interest rate
derivatives of euro 68.5 million and euro 37.3 million. In 2005, we
reported a net loss of euro 112.1 million, or euro 3.59 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, interest expense relating to
our Stendal mill of euro 56.8 million, the unrealized non-cash
foreign exchange loss on our long-term debt of euro 4.2 million and
the non-cash impairment charge of euro 1.7 million relating to
investments, partially offset by a non- cash benefit for income
taxes of euro 13.1 million. In 2006, net income including
discontinued operations was euro 63.2 million, or euro 1.90 per
basic and euro 1.58 per diluted share. In 2005, the net loss
including discontinued operations was euro 117.1 million, or euro
3.75 per basic and diluted share. Discontinued Operations Revenues
from our discontinued operations were euro 46.4 million in 2006,
compared to euro 61.5 million in 2005. For 2006, there was an
operating gain from our discontinued operations of euro 0.3
million, compared to an operating loss of euro 2.3 million in 2005.
Earnings Release Call In conjunction with this press 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 27, 2007 at
10:00 a.m. (Eastern Standard Time). Listeners can access the
conference call live and archived over the Internet through a link
at the Company's website at
http://www.mercerint.com/en/newsCurrent.cfm, or at
http://www.videonewswire.com/event.asp?id=37956. Please allow 15
minutes prior to the call to visit the website 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 6, 2007 at 11:59 p.m. (Eastern Standard Time). The replay
number is (800) 642-1687 for domestic callers or (706) 645-9291 for
international callers. The passcode is 8836168. Mercer
International Inc. is a global pulp manufacturing company. To
obtain further information on the company, please visit its website
at http://www.mercerint.com/. 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,
2006 and 2005 (Euros in thousands) December 31, December 31, 2006
2005 ASSETS Current Assets Cash and cash equivalents euro 69,367
euro 82,775 Cash restricted - 7,039 Receivables 75,022 69,988 Note
receivable, current portion 7,798 - Inventories 62,857 73,742
Prepaid expenses and other 4,662 5,369 Current assets of
discontinued operations 2,094 12,609 Total current assets 221,800
251,522 Long-Term Assets Cash restricted 57,000 24,573 Property,
plant and equipment 972,143 1,015,363 Investments 1 6,314
Unrealized foreign exchange rate derivative gain 5,933 - Deferred
note issuance and other costs 6,984 8,364 Deferred income tax
29,989 78,381 Note receivable, less current portion 8,744 -
Long-term assets of discontinued operations - 9,299 1,080,794
1,142,294 Total assets euro 1,302,594 euro 1,393,816 LIABILITIES
Current Liabilities Accounts payable and accrued expenses euro
83,810 euro 100,285 Pension and other post-retirement benefit
obligations, current portion 363 - Debt, current portion 33,903
25,550 Current liabilities of discontinued operations 1,926 14,492
Total current liabilities 120,002 140,327 Long-Term Liabilities
Debt, less current portion 873,928 919,423 Unrealized foreign
exchange rate derivative loss - 61,979 Unrealized interest rate
derivative losses 41,355 78,646 Pension and other post-retirement
benefit obligations 17,954 17,113 Capital leases and other 7,643
9,945 Deferred income tax 22,911 14,444 Long-term liabilities of
discontinued operations - 3,196 963,791 1,104,746 Total liabilities
1,083,793 1,245,073 Minority Interest - - SHAREHOLDERS' EQUITY
Common shares 195,642 181,586 Additional paid-in capital, stock
options 154 14 Retained earnings (deficit) 15,240 (47,970)
Accumulated other comprehensive income 7,765 15,113 Total
shareholders' equity 218,801 148,743 Total liabilities and
shareholders' equity euro 1,302,594 euro 1,393,816 MERCER
INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS For the
Three Months Ended December 31, 2006 and 2005 (Euros in thousands,
except per share data) 2006 2005 Revenues euro 160,467 euro 123,002
Costs and expenses: Operating costs 105,428 108,964 Operating
depreciation and amortization 14,044 12,890 40,995 1,148 General
and administrative expenses 7,189 5,832 (Sale) purchase of emission
allowances (2,363) (4,939) Operating income from continuing
operations 36,169 255 Other income (expense) Interest expense
(23,162) (23,365) Investment income 2,007 863 Unrealized foreign
exchange gain (loss) on debt 3,776 (2,565) Realized loss on
derivative instruments 1,709 - Unrealized gain (loss) on derivative
instruments 33,107 (1,504) Total other income (expense) 17,437
(26,571) Income (loss) before income taxes and minority interest
from continuing operations 53,606 (26,316) Income tax (provision)
benefit (17,055) (1,487) Income (loss) before minority interest
from continuing operations 36,551 (27,803) Minority interest
(7,945) 598 Net income (loss) from continuing operations 28,606
(27,205) Net income (loss) from discontinued operations (7,133)
(2,568) Net income (loss) 21,473 (29,773) Deficit, beginning of
period (6,233) (18,197) Retained earnings (deficit), end of period
euro 15,240 euro (47,970) Net income (loss) per share Basic euro
0.63 euro (0.90) Diluted euro 0.50 euro (0.90) Income (loss) per
share from continuing operations Basic euro 0.85 euro (0.82)
Diluted euro 0.66 euro (0.82) MERCER INTERNATIONAL INC.
CONSOLIDATED STATEMENTS OF OPERATIONS For the Years Ended December
31, 2006 and 2005 (Unaudited) (Euros in thousands, except per share
data) 2006 2005 Revenues euro 623,977 euro 452,437 Costs and
expenses: Operating costs 462,543 375,408 Operating depreciation
and amortization 55,834 51,160 105,600 25,869 General and
administrative expenses 28,705 24,511 (Sale) purchase of emission
allowances (15,609) (17,292) Operating income from continuing
operations 92,504 18,650 Other income (expense) Interest expense
(91,931) (86,326) Investment income 6,090 2,422 Unrealized foreign
exchange gain (loss) on debt 15,245 (4,156) Realized loss on
derivative instruments (3,510) (2,455) Unrealized gain (loss) on
derivative instruments 109,358 (69,308) Impairment of investments -
(1,699) Total other income (expense) 35,252 (161,522) Income (loss)
before income taxes and minority interest from continuing
operations 127,756 (142,872) Income tax (provision) benefit
(57,443) 13,140 Income (loss) before minority interest from
continuing operations 70,313 (129,732) Minority interest (1,071)
17,674 Net income (loss) from continuing operations 69,242
(112,058) Net loss from discontinued operations (6,032) (5,088) Net
income (loss) euro 63,210 euro (117,146) Net income (loss) per
share from continuing operations Basic euro 2.08 euro (3.59)
Diluted euro 1.72 euro (3.59) Net income (loss) per share Basic
euro 1.90 euro (3.75) Diluted euro 1.58 euro (3.75) MERCER
INTERNATIONAL INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheet As at December 31, 2006 (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. and our
restricted subsidiaries under the indenture, collectively referred
to as the "Restricted Group". As at and during the years ended
December 31, 2006 and 2005, the Restricted Group was comprised of
Mercer International Inc., certain holding subsidiaries and
Rosenthal, and the Celgar mill from the date of its acquisition on
February 14, 2005. During the year ended December 31, 2004, the
Restricted Group was comprised of Mercer International Inc.,
certain holding subsidiaries and Rosenthal, which was the only
member of the Restricted Group with material operations during this
period. The Restricted Group excludes the Stendal mill and our
discontinued operations. December 31, 2006 Restricted Unrestricted
Consolidated Group Subsidiaries Eliminations Group ASSETS Current
Cash and cash equivalents euro 39,078 euro 30,289 euro - euro
69,367 Receivables 38,662 36,360 - 75,022 Note receivable, current
portion 620 7,178 - 7,798 Inventories 41,087 21,770 - 62,857
Prepaid expenses and other 2,352 2,310 - 4,662 Current assets from
discontinued operations - 2,094 - 2,094 Total current assets
121,799 100,001 - 221,800 Cash restricted - 57,000 - 57,000
Property, plant and equipment 408,957 563,186 - 972,143 Other 8,155
4,763 - 12,918 Deferred income tax 14,316 15,673 - 29,989 Due from
unrestricted group 51,265 - (51,265) - Note receivable, less
current portion 5,023 3,721 - 8,744 Total assets euro 609,515 euro
744,344 euro (51,265) euro 1,302,594 LIABILITIES Current Accounts
payable and accrued expenses euro 46,475 euro 37,335 euro - euro
83,810 Pension and other post-retirement benefit obligations,
current portion 363 - - 363 Debt, current portion - 33,903 - 33,903
Current liabilities from discontinued operations - 1,926 - 1,926
Total current liabilities 46,838 73,164 - 120,002 Debt, less
current portion 293,781 571,840 - 865,621 Due to restricted group -
51,265 (51,265) - Unrealized derivative loss - 41,355 - 41,355
Capital leases and other 22,115 11,789 - 33,904 Deferred income tax
2,832 20,079 - 22,911 Total liabilities 365,566 769,492 (51,265)
1,083,793 SHAREHOLDERS' EQUITY Total shareholders' equity (deficit)
243,949 (25,148)(1) - 218,801 Total liabilities and shareholders'
equity euro 609,515 euro 744,344 euro (51,265) euro 1,302,594 (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. MERCER INTERNATIONAL
INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE Combined Condensed
Balance Sheet As at December 31, 2005 (Euros in thousands) December
31, 2005 Restricted Unrestricted Consolidated Group Subsidiaries
Eliminations Group ASSETS Current Cash and cash equivalents euro
48,790 euro 33,985 euro - euro 82,775 Cash restricted - 7,039 -
7,039 Receivables 41,349 28,655 - 70,004 Inventories 47,100 26,642
- 73,742 Prepaid expenses and other 2,940 2,429 - 5,369 Current
assets from discontinued operations - 12,593 - 12,593 Total current
assets 140,179 111,343 - 251,522 Cash restricted - 24,573 - 24,573
Property, plant and equipment 404,151 611,212 - 1,015,363 Other
10,533 4,145 - 14,678 Deferred income tax 24,303 54,078 - 78,381
Due from unrestricted group 46,412 - (46,412) - Long-term assets
from discontinued operations - 9,299 - 9,299 Total assets euro
625,578 euro 814,650 euro (46,412) euro 1,393,816 LIABILITIES
Current Accounts payable and accrued expenses euro 46,867 euro
53,418 euro - euro 100,285 Debt, current portion - 25,550 - 25,550
Current liabilities from discontinued operations - 14,492 - 14,492
Total current liabilities 46,867 93,460 - 140,327 Debt, less
current portion 342,023 577,400 - 919,423 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 Long-term liabilities from discontinued operations - 3,196 -
3,196 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. MERCER INTERNATIONAL INC. RESTRICTED GROUP
SUPPLEMENTAL DISCLOSURE Combined Condensed Statements of Operations
For the Three Months Ended December 31, 2006 and 2005 (Unaudited)
(Euros in thousands) Three Months Ended December 31, 2006
Restricted Unrestricted Consolidated Group Subsidiaries
Eliminations Group Revenues euro 95,456 euro 65,151 euro (140) euro
160,467 Operating costs 71,994 33,432 - 105,426 Operating
depreciation and amortization 7,239 6,807 - 14,046 General and
administrative expenses 3,947 3,242 - 7,189 (Sale) purchase of
emission allowances (1,282) (1,081) - (2,363) Operating income from
continuing operations 13,558 22,751 (140) 36,169 Other income
(expense) Interest expense (9,752) (14,315) 905 (23,162) Investment
income 2,056 856 (905) 2,007 Unrealized foreign exchange gain on
debt 3,776 - - 3,776 Derivative financial instruments, net - 34,816
- 34,816 Total other (expense) income (3,920) 21,357 - 17,437
Income (loss) before income taxes and minority interest from
continuing operations 9,638 44,108 (140) 53,606 Income tax
provision (2,972) (14,083) - (17,055) Income (loss) before minority
interest from continuing operations 6,666 30,025 (140) 36,551
Minority interest - (7,945) - (7,945) Net income (loss) from
continuing operations euro 6,666 euro 22,080 euro (140) euro 28,606
Net income (loss) from discontinued operations euro - euro (7,133)
euro - euro (7,133) Net income (loss) euro 6,666 euro 14,947 euro
(140) euro 21,743 Three Months Ended December 31, 2005 Restricted
Unrestricted Consolidated Group Subsidiaries Eliminations Group
Revenues euro 75,890 euro 47,112 euro - euro 123,002 Operating
costs 71,655 38,914 (1,605) 108,964 Operating depreciation and
amortization 6,467 7,083 (660) 12,890 General and administrative
expenses 3,466 2,366 - 5,832 (Sale) purchase of emission allowances
(2,869) (2,070) - (4,939) Operating income (loss) from continuing
operations (2,829) 819 2,265 255 Other income (expense) Interest
expense (8,434) (15,762) 831 (23,365) Investment income 1,429 265
(831) 863 Derivative financial instruments, net 199 (1,703) -
(1,504) Unrealized foreign exchange loss on debt (2,565) - -
(2,565) Total other expense (9,371) (17,200) - (26,571) Income
(loss) before income taxes and minority interest from continuing
operations (12,200) (16,381) 2,265 (26,316) Income tax (provision)
benefit 6,706 (8,193) - (1,487) Income (loss) before minority
interest from continuing operations (5,494) (24,574) 2,265 (27,803)
Minority interest - 598 - 598 Net income (loss) from continuing
operations euro (5,494) euro (23,976) euro 2,265 euro (27,205) Net
income (loss) from discontinued operations euro - euro (2,568) euro
- euro (2,568) Net income (loss) euro (5,494) euro (26,544) euro
2,265 euro (29,773) MERCER INTERNATIONAL INC. RESTRICTED GROUP
SUPPLEMENTAL DISCLOSURE Combined Condensed Statements of Operations
For the Years Ended December 31, 2006 and 2005 (Euros in thousands)
Year Ended December 31, 2006 Restricted Unrestricted Consolidated
Group Subsidiaries Eliminations Group Revenues euro 360,986 euro
262,991 euro - euro 623,977 Operating costs 286,087 176,456 -
462,543 Operating depreciation and amortization 27,819 28,015 -
55,834 General and administrative expenses 17,611 11,094 - 28,705
(Sale) purchase of emission allowances (4,933) (10,676) - (15,609)
Operating income from continuing operations 34,402 58,102 - 92,504
Other income (expense) Interest expense (34,354) (61,137) 3,560
(91,931) Investment income 5,316 4,334 (3,560) 6,090 Derivative
financial instruments, net - 105,848 - 105,848 Unrealized foreign
exchange gain on debt 15,245 - - 15,245 Total other (expense)
income (13,793) 49,045 - 35,252 Income (loss) before income taxes
and minority interest from continuing operations 20,609 107,147 -
127,756 Income tax provision (11,258) (46,185) - (57,443) Income
(loss) before minority interest from continuing operations 9,351
60,962 - 70,313 Minority interest - (1,071) - (1,071) Net income
from continuing operations euro 9,351 euro 59,891 euro - euro
69,242 Net loss from discontinued operations euro - euro (6,032)
euro - euro (6,032) Net income euro 9,351 euro 53,859 euro - euro
63,210 Year Ended December 31, 2005 Restricted Unrestricted
Consolidated Group Subsidiaries Eliminations Group Revenues euro
276,406 euro 176,031 euro - euro 452,437 Operating costs 230,039
146,974 (1,605) 375,408 Operating depreciation and amortization
23,898 27,262 - 51,160 General and administrative expenses 19,025
5,486 - 24,511 (Sale) purchase of emission allowances (7,271)
(10,021) - (17,292) Operating income from continuing operations
10,715 6,330 1,605 18,650 Other income (expense) Interest expense
(32,352) (56,789) 2,815 (86,326) Investment income 3,742 1,495
(2,815) 2,422 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) (126,762) - (161,522) Income (loss) before income
taxes and minority interest from continuing operations (24,045)
(120,432) 1,605 (142,872) Income tax (provision) benefit (1,161)
14,301 - 13,140 Loss before minority interest from continuing
operations (25,206) (106,131) 1,605 (129,732) Minority interest -
17,674 - 17,674 Net loss from continuing operations euro (25,206)
euro (88,457) euro 1,605 euro (112,058) Net loss from discontinued
operations euro - euro (5,088) euro - euro (5,088) Net loss euro
(25,206) euro (93,545) euro 1,605 euro (117,146) MERCER
INTERNATIONAL INC. COMPUTATION OF OPERATING EBITDA For the Three
Months and Years Ended December 31, 2006 and 2005 (Unaudited)
(Euros in thousands) Three Months Ended December 31, 2006 2005(1)
(in thousands) Net income (loss) euro 21,473 euro (29,773) Net loss
from discontinued operations 7,133 2,568 Net income (loss) from
continuing operations 28,606 (27,205) Minority interest 7,945 (598)
Income taxes (benefit) 17,055 1,487 Interest expense 23,162 23,365
Investment income (2,007) (863) Foreign exchange (gain) loss on
debt (3,776) 2,565 Derivative financial instruments, net (gain)
loss (34,816) 1,504 Income from continuing operations 36,169 255
Add: Depreciation and amortization 14,044 12,890 Operating
EBITDA(2) euro 50,213 euro 13,145 Year Ended December 31, 2006
2005(1) (in thousands) Net income (loss) euro 63,210 euro (117,146)
Net loss from discontinued operations 6,032 5,088 Net income (loss)
from continuing operations 69,242 (112,058) Minority interest 1,071
(17,674) Income taxes (benefit) 57,443 (13,140) Interest expense
91,931 86,326 Investment income (6,090) (2,422) Foreign exchange
(gain ) loss on debt (15,245) 4,156 Derivative financial
instruments, net (gain) loss (105,848) 71,763 Impairment of
investments - 1,699 Income from continuing operations 92,504 18,650
Add: Depreciation and amortization 55,834 51,160 Operating
EBITDA(2) euro 148,338 euro 69,810 (1) The results of the Celgar
pulp mill are included from the date of its acquisition on February
14, 2005. (2) 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 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 our results as reported under GAAP.
MERCER INTERNATIONAL INC. COMPUTATION OF RESTRICTED GROUP OPERATING
EBITDA For the Three Months and Years Ended December 31, 2006 and
2005 (Unaudited) (Euros in thousands) Three Months Ended December
31, 2006 2005 (in thousands) Restricted Group(2) Net income (loss)
euro 6,666 euro (5,494) Income taxes (benefit) 2,972 (6,706)
Interest expense 9,752 8,434 Investment and other income (2,056)
(1,429) Derivative financial instruments, net - (199) Foreign
exchange (gain) loss on debt (3,776) 2,565 Income from operations
13,558 (2,829) Add: Depreciation and amortization 7,239 6,467
Operating EBITDA(2) euro 20,797 euro 3,638 Year Ended December 31,
2006 2005 (in thousands) Restricted Group(1) Net income (loss) euro
9,351 euro (25,206) Income taxes 11,258 1,161 Interest expense
34,354 32,352 Investment and other expense (income) (5,316) (3,742)
Derivative financial instruments, net - 295 Foreign exchange (gain)
loss on debt (15,245) 4,156 Impairment of investments - 1,699
Income from operations 34,402 10,715 Add: Depreciation and
amortization 27,819 23,898 Operating EBITDA(2) euro 62,221 euro
34,613 (1) The results of the Celgar pulp mill are included from
the date of its acquisition on February 14, 2005. (2) Operating
EBITDA does not reflect the impact of a number of items that affect
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 our
results as reported under GAAP. DATASOURCE: Mercer International
Inc. CONTACT: Jimmy S.H. Lee, Chairman & President,
+1-604-684-1099, or David M. Gandossi, Executive Vice-President
& Chief Financial Officer, +1-604-684-1099, both of Mercer
International Inc.; or Investors: Eric Boyriven, Alexandra Tramont,
or Media: Scot Hoffman, all of Financial Dynamics, +1-212-850-5600,
for Mercer International Inc. Web site: http://www.mercerint.com/
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