Exhibit 99.1

 

 

For Immediate Release

MERCER INTERNATIONAL INC. REPORTS 2012 FIRST QUARTER RESULTS

NEW YORK, NY, May 3, 2012 - Mercer International Inc. (Nasdaq: MERC, TSX: MRI.U) today reported results for the first quarter ended March 31, 2012. Operating EBITDA* in the first quarter of 2012 was €30.6 million ($40.1 million), compared to €50.8 million ($69.5 million) in the first quarter of 2011 and €17.0 million ($22.9 million) in the fourth quarter of 2011.

For the first quarter of 2012, we had net income of €1.2 million ($1.6 million), or €0.02 ($0.03) per basic share, compared to net income of €29.1 million ($39.8 million), or €0.66 ($0.90) per basic share, in the first quarter of 2011 and a net loss of €1.8 million ($2.4 million), or €0.03 ($0.04) per basic share, for the fourth quarter of 2011.

Summary Financial Highlights

 

		Q1				Q4				Q1
		2012				2011				2011
		(in millions of Euros, except where otherwise stated)
Pulp revenues		€	199.4			€	213.2			€	210.5
Energy revenues			16.1				16.0				13.7
Operating income			16.2				3.0				36.6
Operating EBITDA			30.6				17.0				50.8
Unrealized gain (loss) on derivative instruments			0.9				(0.8	)			12.2
Foreign exchange gain (loss) on debt			—				(0.1	)			1.1
Income tax benefit (provision)			(0.7	)			8.3				(0.8	)
Net income (loss) attributable to common shareholders			1.2				(1.8	)			29.1
Net income (loss) per share attributable to common shareholders
Basic		€	0.02			€	(0.03	)		€	0.66
Diluted		€	0.02			€	(0.03	)		€	0.52
Common shares outstanding at period end (000s)			55,779				55,779				45,386
Summary Operating Highlights
		Q1				Q4				Q1
		2012				2011				2011
Pulp Production (‘000 ADMTs)			380.3				364.9				358.6
Scheduled Production Downtime (‘000 ADMTs)			—				27.9				3.7
Pulp Sales (‘000 ADMTs)			384.8				400.0				349.0
Average NBSK pulp list price in Europe ($/ADMT)			837				868				960
Average NBSK pulp list price in Europe (€/ADMT)			638				644				702
Average pulp sales realizations (€/ADMT)(1)			512				527				593
Energy Production (‘000 MWh)			436.2				409.5				407.8
Energy Sales (‘000 MWh)			182.4				169.0				157.9

 

(1)	Average realized pulp prices for the periods indicated reflect customer discounts and pulp price movements between the order and shipment date.

 

 

*

Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States (“GAAP”) and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. See page 9 of the financial tables included in this press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA.

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		Q1				Q4				Q1
		2012				2011				2011
Average Spot Currency Exchange Rates:
€ / $(2)			0.7623				0.7425				0.7304
C$ / $(2)			1.0009				1.0227				0.9856
C$ / €(3)			1.3129				1.3788				1.3487

 

(2)	Average Federal Reserve Bank of New York noon spot rate over the reporting period.

(3)	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 generally pleased with our first quarter results as, despite a relatively weak NBSK pulp price environment, we still achieved Operating EBITDA of €30.6 million, primarily as a result of strong pulp production and record energy sales at our mills.”

Mr. Lee continued: “Pulp prices remained relatively stable in the first quarter of 2012 as economic uncertainty in Europe was mostly offset by increased demand in China. Overall, at the end of the first quarter, list prices in Europe were approximately $850 per ADMT and in North America and China were approximately $870 and $700 per ADMT, respectively. Going forward, we currently anticipate that NBSK pulp prices will continue to gradually increase in the medium term.”

Mr. Lee continued: “We continue to improve efficiencies at our mills. In the first quarter, we commenced Project Blue Mill at our Stendal mill that is intended to increase the production of both pulp and highly profitable green energy. We currently anticipate that, once completed, Project Blue Mill will increase our Stendal mill’s annual pulp production by 30,000 ADMTs and energy production by 109,000 MWh.”

Mr. Lee added: “Decreased demand from the European pellet and board producers has resulted in reduced fiber costs at our German mills. We also currently anticipate that our Celgar mill’s fiber costs will begin to decline early in the third quarter.”

Mr. Lee concluded: “Despite continued economic uncertainty in Europe, we currently believe that strong Chinese demand, along with increased energy revenues and continued strong performance at our mills, should enable us to continue to enhance value for our stakeholders.”

Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

Total revenues for the three months ended March 31, 2012 decreased slightly to €215.6 million ($282.7 million) from €224.1 million ($306.6 million) in the same period in 2011, due to lower average pulp realizations, partially offset by higher energy revenues. Pulp revenues for the three months ended March 31, 2012 decreased to €199.4 million from €210.5 million in the comparative period of 2011, primarily due to lower pulp prices, partially offset by higher sales volumes and a stronger U.S. dollar relative to the Euro.

 

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Revenues from the sale of excess energy increased by approximately 18% in the first quarter to a record €16.1 million from €13.7 million in the same quarter last year, as a result of strong pulp production at all of our mills.

Pulp production increased to 380,342 ADMTs in the current quarter, from 358,557 ADMTs in the same quarter of 2011, primarily due to increased production at both our Stendal and Celgar mills. We have 21 days (approximately 20,000 ADMTs) of maintenance downtime scheduled for our Rosenthal mill in the second quarter of 2012 in order to perform annual maintenance and to upgrade the mill’s recovery process.

Pulp sales volume increased to 384,826 ADMTs in the first quarter from 348,995 ADMTs in the comparative period of 2011, primarily as a result of increased sales to China. Average pulp sales realizations decreased to €512 per ADMT in the first quarter of 2012, compared to €593 per ADMT in the same period last year, due to lower pulp prices, partially offset by a stronger U.S. dollar relative to the Euro.

Costs and expenses in the first quarter of 2012 increased to €199.3 million from €187.5 million in the comparative period of 2011, primarily due to higher sales volumes.

On average, our per unit fiber costs in the current quarter decreased by approximately 3% from the same period in 2011, primarily due to lower fiber costs at our German mills caused by reduced demand from the European pellet and board industries, partially offset by higher fiber costs at our Celgar mill. As we move into the second quarter, we currently expect fiber prices at our German mills to continue to decline, while we currently expect fiber prices at our Celgar mill to remain stable through the second quarter and then begin to decline slightly early in the third quarter.

Selling, general and administrative expenses remained at €10.1 million in the first quarter of 2012, compared to the first quarter of 2011.

For the first quarter of 2012, operating income decreased to €16.2 million from €36.6 million in the comparative quarter of 2011, primarily due to lower pulp revenues resulting from lower pulp prices, partially offset by higher sales volumes and a stronger U.S. dollar relative to the Euro.

Interest expense in the first quarter of 2012 decreased to €14.1 million from €15.9 million in the comparative quarter of 2011, primarily due to the conversion of our remaining convertible notes in 2011 and lower debt levels associated with the Stendal mill.

Our Stendal mill recorded an unrealized gain of €0.9 million on our interest rate derivative in the current quarter, compared to an unrealized gain of €12.2 million in the same quarter of last year. We recorded a foreign exchange gain on our debt of €nil in the first quarter of 2012, compared to a gain of €1.1 million in the same period last year.

 

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In the first quarter of 2012, the noncontrolling shareholder’s interest in the Stendal mill’s income was €0.7 million, compared to income of €4.5 million in the same quarter last year.

In the first quarter of 2012, Operating EBITDA decreased to €30.6 million from €50.8 million in the first quarter of 2011. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment charges. Operating EBITDA has significant limitations as an analytical tool and should not be considered in isolation or as a substitute for our results as reported under GAAP. See page 9 of the financial tables included in the press release for a reconciliation of net income (loss) attributable to common shareholders to Operating EBITDA.

We reported net income attributable to common shareholders of €1.2 million, or €0.02 per basic and diluted share, for the first quarter of 2012, which included a non-cash unrealized gain of €0.9 million on the Stendal interest rate derivative, offset by a non-cash charge for stock compensaton of €0.9 million. In the first quarter of 2011, we reported net income attributable to common shareholders of €29.1 million, or €0.66 per basic and €0.52 per diluted share, which included a non-cash unrealized gain of €12.2 million on the Stendal interest rate derivative and a €1.1 million non-cash foreign currency translation gain on our debt, partially offset by a non-cash charge for stock compensation of €2.1 million.

Liquidity and Capital Resources

The following table is a summary of selected financial information as at the dates indicated:

 

		As at March 31,				As at December 31,
		2012				2011
		(in thousands)
Financial Position
Cash and cash equivalents		€	124,196			€	105,072
Marketable securities(1)			12,438				12,372
Working capital			238,046				247,159
Property, plant and equipment			813,137				820,974
Total assets			1,213,199				1,217,250
Long-term liabilities			787,013				807,641
Total equity			288,624				283,542

 

(1)	Principally comprised of German federal government bonds with a maturity of less than one year.

As at March 31, 2012, we had approximately €26.4 million and C$31.3 million available under our Rosenthal and Celgar facilities, respectively. As at March 31, 2012, approximately €467.9 million was outstanding under our Stendal mill’s loan facility, compared to €486.1 million as at March 31, 2011.

 

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Restricted Group

The following table is a summary of selected financial information for the Restricted Group (which, under the indenture for our 2017 9.5% Senior Notes, is comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills) as at the dates indicated:

 

		As at March 31,				As at December 31,
		2012				2011
		(in thousands)
Financial Position
Cash and cash equivalents		€	53,595			€	44,829
Marketable securities(1)			12,438				12,372
Working capital			149,641				149,973
Property, plant and equipment			348,718				353,925
Total assets			665,460				658,844
Long-term liabilities			261,169				262,770
Total equity			347,336				344,415

 

(1)	Principally comprised of German federal government bonds with a maturity of less than one year.

Earnings Release Call

In conjunction with this release, Mercer International Inc. will host a conference call, which will be simultaneously broadcast live over the Internet. Management will host the call, which is scheduled for Friday, May 4, 2012 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through June 4, 2012, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm? eventid=112666&CompanyID=MERC&e=1&mediakey= 1AE35D7DABC3ECD95E2779DA87354812 or through a link on the Company’s home page at http://www.mercerint.com. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software. A replay of this call will be available approximately two hours after the live call ends until June 4, 2012 at 11:59 PM (Eastern Standard Time) through a link on the Company’s Investors/News Releases page at http://www.mercerint.com/s/newsreleases.asp.

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

 

Page 5

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

APPROVED BY:

Jimmy S.H. Lee

Chairman & President

(604) 684-1099

David M. Gandossi

Executive Vice-President &

Chief Financial Officer

(604) 684-1099

-FINANCIAL TABLES FOLLOW-

 

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands of Euros)

 

		March 31, 2012				December 31, 2011
ASSETS
Current assets
Cash and cash equivalents		€	124,196			€	105,072
Marketable securities			12,209				12,216
Receivables			116,797				120,487
Inventories			108,379				120,539
Prepaid expenses and other			7,350				8,162
Deferred income tax			6,677				6,750
Total current assets			375,608				373,226
Long-term assets
Property, plant and equipment			813,137				820,974
Deferred note issuance and other			11,770				10,763
Deferred income tax			12,684				12,287
			837,591				844,024
Total assets		€	1,213,199			€	1,217,250
LIABILITIES
Current liabilities
Accounts payable and other		€	100,725			€	99,640
Pension and other post-retirement benefit obligations			749				756
Debt			36,088				25,671
Total current liabilities			137,562				126,067
Long-term liabilities
Debt			687,723				708,415
Unrealized interest rate derivative losses			51,515				52,391
Pension and other post-retirement benefit obligations			30,859				31,197
Capital leases and other			12,646				13,053
Deferred income tax			4,270				2,585
			787,013				807,641
Total liabilities		€	924,575			€	933,708
EQUITY
Shareholders’ equity
Share capital			248,014				247,642
Paid-in capital			(4,355	)			(4,857	)
Retained earnings			39,158				37,985
Accumulated other comprehensive income			23,710				21,346
Total shareholders’ equity			306,527				302,116
Noncontrolling deficit			(17,903	)			(18,574	)
Total equity			288,624				283,542
Total liabilities and equity		€	1,213,199			€	1,217,250

 

(1)

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands of Euros, except per share data)

 

		Three Months Ended
		March 31,
		2012				2011
Revenues
Pulp		€	199,439			€	210,458
Energy			16,111				13,677
			215,550				224,135
Costs and expenses
Operating costs			174,962				163,355
Operating depreciation and amortization			14,287				14,076
			26,301				46,704
Selling, general and administrative expenses			10,058				10,060
Operating income			16,243				36,644
Other income (expense)
Interest expense			(14,133	)			(15,906	)
Gain on derivative instruments			876				12,243
Foreign exchange gain on debt			—				1,111
Other income (expense)			(410	)			327
Total other income (expense)			(13,667	)			(2,225	)
Income before income taxes			2,576				34,419
Income tax provision – current			(56	)			(819	)
– deferred			(676	)			—
Net income			1,844				33,600
Less: net income attributable to noncontrolling interest			(671	)			(4,547	)
Net income attributable to common shareholders		€	1,173			€	29,053
Net income per share attributable to common shareholders
Basic		€	0.02			€	0.66
Diluted		€	0.02			€	0.52

 

(2)

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MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands of Euros)

 

		Three Months Ended
		March 31,
		2012				2011
Cash flows from (used in) operating activities
Net income attributable to common shareholders		€	1,173			€	29,053
Adjustments to reconcile net income attributable to common shareholders to cash flows from operating activities
Gain on derivative instruments			(876	)			(12,243	)
Foreign exchange gain on debt			—				(1,111	)
Depreciation and amortization			14,350				14,138
Accretion expense			—				470
Noncontrolling interest			671				4,547
Deferred income taxes			676				—
Stock compensation expense			868				2,068
Pension and other post-retirement expense, net of funding			(14	)			(14	)
Other			793				684
Changes in current assets and liabilities
Receivables			2,685				7,177
Inventories			11,738				4,313
Accounts payable and accrued expenses			2,649				25,388
Other			1,424				359
Net cash from operating activities			36,137				74,829
Cash flows from (used in) investing activities
Purchase of property, plant and equipment			(8,465	)			(8,069	)
Proceeds on sale of property, plant and equipment			226				353
Note receivable			—				396
Net cash used in investing activities			(8,239	)			(7,320	)
Cash flows from (used in) financing activities
Repayment of notes payable and debt			(10,126	)			(30,351	)
Repayment of capital lease obligations			(611	)			(855	)
Proceeds from (repayment of) credit facilities, net			3,759				(14,652	)
Payment of note issuance costs			(1,621	)			—
Proceeds from government grants			630				4,112
Net cash used in financing activities			(7,969	)			(41,746	)
Effect of exchange rate changes on cash and cash equivalents			(805	)			(1,544	)
Net increase in cash and cash equivalents			19,124				24,219
Cash and cash equivalents, beginning of period			105,072				99,022
Cash and cash equivalents, end of period		€	124,196			€	123,241

 

(3)

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MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE

Combined Condensed Balance Sheets

(Unaudited)

(In thousands of Euros)

The terms of the indenture governing our 9.5% senior unsecured notes requires that we provide the results of operations and financial condition of Mercer International Inc. and our restricted subsidiaries under the indenture, collectively referred to as the “Restricted Group”. As at and during the three months ended March 31, 2012 and 2011, the Restricted Group was comprised of Mercer International Inc., certain holding subsidiaries and our Rosenthal and Celgar mills. The Restricted Group excludes the Stendal mill.

 

		March 31, 2012
		Restricted Group				Unrestricted Subsidiaries				Eliminations				Consolidated Group
ASSETS
Current assets
Cash and cash equivalents		€	53,595			€	70,601			€	—			€	124,196
Marketable securities			12,209				—				—				12,209
Receivables			63,795				53,002				—				116,797
Inventories			67,252				41,127				—				108,379
Prepaid expenses and other			4,639				2,711				—				7,350
Deferred income tax			5,106				1,571				—				6,677
Total current assets			206,596				169,012				—				375,608
Long-term assets
Property, plant and equipment			348,718				464,419				—				813,137
Deferred note issuance and other			5,619				6,151				—				11,770
Deferred income tax			8,889				3,795				—				12,684
Due from unrestricted group			95,638				—				(95,638	)			—
Total assets		€	665,460			€	643,377			€	(95,638	)		€	1,213,199
LIABILITIES
Current liabilities
Accounts payable and other		€	55,118			€	45,607			€	—			€	100,725
Pension and other post-retirement benefit obligations			749				—				—				749
Debt			1,088				35,000				—				36,088
Total current liabilities			56,955				80,607				—				137,562
Long-term liabilities
Debt			219,601				468,122				—				687,723
Due to restricted group			—				95,638				(95,638	)			—
Unrealized interest rate derivative losses			—				51,515				—				51,515
Pension and other post-retirement benefit obligations			30,859				—				—				30,859
Capital leases and other			6,439				6,207				—				12,646
Deferred income tax			4,270				—				—				4,270
Total liabilities			318,124				702,089				(95,638	)			924,575
EQUITY
Total shareholders’ equity (deficit)			347,336				(40,809	)			—				306,527
Noncontrolling deficit			—				(17,903	)			—				(17,903	)
Total liabilities and equity		€	665,460			€	643,377			€	(95,638	)		€	1,213,199

 

(4)

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MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE

Combined Condensed Balance Sheets

(Unaudited)

(In thousands of Euros)

 

		December 31, 2011
		Restricted Group				Unrestricted Subsidiaries				Eliminations				Consolidated Group
ASSETS
Current assets
Cash and cash equivalents		€	44,829			€	60,243			€	—			€	105,072
Marketable securities			12,216				—				—				12,216
Receivables			62,697				57,790				—				120,487
Inventories			71,692				48,847				—				120,539
Prepaid expenses and other			5,019				3,143				—				8,162
Deferred income tax			5,179				1,571				—				6,750
Total current assets			201,632				171,594				—				373,226
Long-term assets
Property, plant and equipment			353,925				467,049				—				820,974
Deferred note issuance and other			5,971				4,792				—				10,763
Deferred income tax			8,492				3,795				—				12,287
Due from unrestricted group			88,824				—				(88,824	)			—
Total assets		€	658,844			€	647,230			€	(88,824	)		€	1,217,250
LIABILITIES
Current liabilities
Accounts payable and other		€	49,815			€	49,825			€	—			€	99,640
Pension and other post-retirement benefit obligations			756				—				—				756
Debt			1,088				24,583				—				25,671
Total current liabilities			51,659				74,408				—				126,067
Long-term liabilities
Debt			222,384				486,031				—				708,415
Due to restricted group			—				88,824				(88,824	)			—
Unrealized interest rate derivative losses			—				52,391				—				52,391
Pension and other post-retirement benefit obligations			31,197				—				—				31,197
Capital leases and other			6,604				6,449				—				13,053
Deferred income tax			2,585				—				—				2,585
Total liabilities			314,429				708,103				(88,824	)			933,708
EQUITY
Total shareholders’ equity (deficit)			344,415				(42,299	)			—				302,116
Noncontrolling deficit			—				(18,574	)			—				(18,574	)
Total liabilities and equity		€	658,844			€	647,230			€	(88,824	)		€	1,217,250

 

(5)

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MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE

Combined Condensed Statements of Operations

(Unaudited)

(In thousands of Euros)

 

		Three Months Ended March 31, 2012
		Restricted Group				Unrestricted Subsidiaries				Eliminations				Consolidated Group
Revenues
Pulp		€	109,889			€	89,550			€	—			€	199,439
Energy			7,991				8,120				—				16,111
			117,880				97,670				—				215,550
Operating costs			98,336				76,626				—				174,962
Operating depreciation and amortization			7,640				6,647				—				14,287
Selling, general and administrative expenses			6,521				3,537				—				10,058
			112,497				86,810				—				199,307
Operating income			5,383				10,860				—				16,243
Other income (expense)
Interest expense			(5,810	)			(9,664	)			1,341				(14,133	)
Gain on derivative instruments			—				876				—				876
Other income (expense)			825				106				(1,341	)			(410	)
Total other income (expense)			(4,985	)			(8,682	)			—				(13,667	)
Income before income taxes			398				2,178				—				2,576
Income tax provision			(715	)			(17	)			—				(732	)
Net income (loss)			(317	)			2,161				—				1,844
Less: net income attributable to noncontrolling interest			—				(671	)			—				(671	)
Net income (loss) attributable to common shareholders		€	(317	)		€	1,490			€	—			€	1,173

 

		Three Months Ended March 31, 2011
		Restricted Group				Unrestricted Subsidiaries				Eliminations				Consolidated Group
Revenues
Pulp		€	115,226			€	95,232			€	—			€	210,458
Energy			5,846				7,831				—				13,677
			121,072				103,063				—				224,135
Operating costs			85,991				77,364				—				163,355
Operating depreciation and amortization			7,614				6,462				—				14,076
Selling, general and administrative expenses			6,191				3,869				—				10,060
			99,796				87,695				—				187,491
Operating income			21,276				15,368				—				36,644
Other income (expense)
Interest expense			(7,273	)			(9,851	)			1,218				(15,906	)
Gain on derivative instruments			—				12,243				—				12,243
Foreign exchange gain on debt			1,111				—				—				1,111
Other income			1,279				266				(1,218	)			327
Total other income (expense)			(4,883	)			2,658				—				(2,225	)
Income before income taxes			16,393				18,026				—				34,419
Income tax provision			(524	)			(295	)			—				(819	)
Net income			15,869				17,731				—				33,600
Less: net income attributable to noncontrolling interest			—				(4,547	)			—				(4,547	)
Net income attributable to common shareholders		€	15,869			€	13,184			€	—			€	29,053

 

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MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE

Combined Condensed Statements of Cash Flows

(Unaudited)

(In thousands of Euros)

 

		Three Months Ended March 31, 2012
		Restricted Group				Unrestricted Group				Consolidated Group
Cash flows from (used in) operating activities
Net income (loss) attributable to common shareholders		€	(317	)		€	1,490			€	1,173
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities
Gain on derivative instruments			—				(876	)			(876	)
Depreciation and amortization			7,703				6,647				14,350
Noncontrolling interest			—				671				671
Deferred income tax			676				—				676
Stock compensation expense			868				—				868
Pension and other post-retirement expense, net of funding			(14	)			—				(14	)
Other			58				735				793
Changes in current assets and liabilities
Receivables			(2,110	)			4,795				2,685
Inventories			4,018				7,720				11,738
Accounts payable and accrued expenses			5,535				(2,886	)			2,649
Other(1)			(6,474	)			7,898				1,424
Net cash from operating activities			9,943				26,194				36,137
Cash flows from (used in) investing activities
Purchase of property, plant and equipment			(4,218	)			(4,247	)			(8,465	)
Proceeds on sale of property, plant and equipment			186				40				226
Net cash used in investing activities			(4,032	)			(4,207	)			(8,239	)
Cash flows from (used in) financing activities
Repayment of notes payable and debt			(543	)			(9,583	)			(10,126	)
Repayment of capital lease obligations			(186	)			(425	)			(611	)
Proceeds from credit facilities, net			3,759				—				3,759
Payment of note issuance costs			—				(1,621	)			(1,621	)
Proceeds from government grants			630				—				630
Net cash from (used in) financing activities			3,660				(11,629	)			(7,969	)
Effect of exchange rate changes on cash and cash equivalents			(805	)			—				(805	)
Net increase in cash and cash equivalents			8,766				10,358				19,124
Cash and cash equivalents, beginning of period			44,829				60,243				105,072
Cash and cash equivalents, end of period		€	53,595			€	70,601			€	124,196

 

(1)	Includes intercompany working capital related transactions.

 

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MERCER INTERNATIONAL INC.

RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE

Combined Condensed Statements of Cash Flows

(Unaudited)

(In thousands of Euros)

 

		Three Months Ended March 31, 2011
		Restricted Group				Unrestricted Group				Consolidated Group
Cash flows from (used in) operating activities
Net income attributable to common shareholders		€	15,869			€	13,184			€	29,053
Adjustments to reconcile net income attributable to common shareholders to cash flows from operating activities
Gain on derivative instruments			—				(12,243	)			(12,243	)
Foreign exchange gain on debt			(1,111	)			—				(1,111	)
Depreciation and amortization			7,676				6,462				14,138
Accretion expense			470				—				470
Noncontrolling interest			—				4,547				4,547
Stock compensation expense			2,068				—				2,068
Pension and other post-retirement expense, net of funding			(14	)			—				(14	)
Other			133				551				684
Changes in current assets and liabilities
Receivables			6,259				918				7,177
Inventories			(251	)			4,564				4,313
Accounts payable and accrued expenses			10,962				14,426				25,388
Other(1)			(1,722	)			2,081				359
Net cash from operating activities			40,339				34,490				74,829
Cash flows from (used in) investing activities
Purchase of property, plant and equipment			(5,708	)			(2,361	)			(8,069	)
Proceeds on sale of property, plant and equipment			3				350				353
Notes receivable			396				—				396
Net cash used in investing activities			(5,309	)			(2,011	)			(7,320	)
Cash flows from (used in) financing activities
Repayment of notes payable and debt			(15,768	)			(14,583	)			(30,351	)
Repayment of capital lease obligations			(522	)			(333	)			(855	)
Repayment of credit facilities, net			(14,652	)			—				(14,652	)
Proceeds from government grants			4,004				108				4,112
Net cash used in financing activities			(26,938	)			(14,808	)			(41,746	)
Effect of exchange rate changes on cash and cash equivalents			(1,544	)			—				(1,544	)
Net increase in cash and cash equivalents			6,548				17,671				24,219
Cash and cash equivalents, beginning of period			50,654				48,368				99,022
Cash and cash equivalents, end of period		€	57,202			€	66,039			€	123,241

 

(1)	Includes intercompany working capital related transactions.

 

(8)

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MERCER INTERNATIONAL INC.

COMPUTATION OF OPERATING EBITDA

(Unaudited)

(In thousands of Euros)

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

Operating EBITDA does not reflect the impact of a number of items that affect our net income, including financing costs and the effect of derivative instruments. Operating EBITDA is not a measure of financial performance under GAAP, and should not be considered as an alternative to net income or income from operations as a measure of performance, nor as an alternative to net cash from operating activities as a measure of liquidity. The following tables set forth the net income (loss) attributable to common shareholders to Operating EBITDA for both the consolidated group and our Restricted Group:

 

		Three Months Ended March 31,
		2012				2011
Net income attributable to common shareholders		€	1,173			€	29,053
Net income attributable to noncontrolling interest			671				4,547
Income tax provision			732				819
Interest expense			14,133				15,906
Other expense (income)			410				(327	)
Foreign exchange gain on debt			—				(1,111	)
Loss (gain) on derivative financial instruments			(876	)			(12,243	)
Operating income			16,243				36,644
Add: Depreciation and amortization			14,350				14,138
Operating EBITDA		€	30,593			€	50,782

 

		Three Months Ended March 31,
		2012				2011
Restricted Group
Net income (loss) attributable to common shareholders(1)		€	(317	)		€	15,869
Income tax provision			715				524
Interest expense			5,810				7,273
Other income			(825	)			(1,279	)
Foreign exchange gain on debt			—				(1,111	)
Operating income			5,383				21,276
Add: Depreciation and amortization			7,703				7,676
Operating EBITDA		€	13,086			€	28,952

 

(1)	For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same.

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