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Press release from GlobeNewswire (a Nasdaq OMX company)

Mercer International Inc. Reports Record Annual Pulp Production, Pulp Sales Volumes and Energy Sales and 2012 Fourth Quarter and Year End Results

Wednesday, February 13, 2013

Mercer International Inc. Reports Record Annual Pulp Production, Pulp Sales Volumes and Energy Sales and 2012 Fourth Quarter and Year End Results13:30 EST Wednesday, February 13, 2013NEW YORK, Feb. 13, 2013 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq:MERC) (TSX:MRI.U) today reported results for the fourth quarter and for the year ended December 31, 2012. Operating EBITDA* in the fourth quarter of 2012 was €21.3 million ($27.6 million), compared to €17.0 million ($22.9 million) in the fourth quarter of 2011 and €22.3 million ($27.9 million) in the third quarter of 2012. For 2012, Operating EBITDA was €107.1 million ($137.7 million), compared to €167.1 million ($232.6 million) in 2011. For the fourth quarter of 2012, we had a net loss of €5.2 million ($6.7 million), or €0.09 ($0.12) per basic share, compared to a net loss of €1.8 million ($2.4 million), or €0.03 ($0.04) per basic share, in the fourth quarter of 2011 and a net loss of €9.7 million ($12.1 million), or €0.17 ($0.21) per basic share, for the third quarter of 2012. For 2012, we reported net loss of €12.2 million ($15.7 million), or €0.22 ($0.28) per basic share, compared to net income of €50.1 million ($69.7 million), or €1.00 ($1.39) per basic share, in 2011.Summary Financial Highlights  Q4 Q3 Q4Year Year  2012   2012   2011  2012   2011  (in millions of Euros, other than per share amounts) Pulp revenues€ 171.3 € 205.1 € 213.2€ 761.9  € 831.4 Energy and chemical revenues 17.2  18.2  18.3 72.3   68.1 Operating income 7.3  7.2  3.0 49.0  111.1 Operating EBITDA 21.3  22.3  17.0 107.1  167.1 Gain (loss) on derivative instruments 2.4  (0.9)  (0.8) 3.7  (1.4) Foreign exchange gain (loss) on debt ----  (0.1) --  1.2 Income tax benefit (provision) (2.4)  (1.9)  8.3 (7.3)  0.7 Net income (loss)(1) (5.2)  (9.7)  (1.8) (12.2)  50.1 Net income (loss) per share(1)          Basic€ (0.09) € (0.17) € (0.03)€ (0.22)  € 1.00  Diluted€ (0.09) € (0.17) € (0.03)€ (0.22)  € 0.89 Common shares outstanding at period end (000s) 55,816  55,816  55,779 55,816  55,779           (1) Attributable to common shareholders         * Operating EBITDA is not a measure of financial performance under accounting principles generally accepted in the United States ("GAAP") and should not be considered in isolation or as a substitute for analysis of our results as reported under GAAP. Operating EBITDA is defined as operating income (loss) plus depreciation and amortization and non-recurring capital asset impairment changes. See page 10 of the financial tables included in this press release for a reconciliation of net income (loss) to Operating EBITDA.Summary Operating Highlights Q4 Q3 Q4Year Year  2012   2012   2011  2012   2011  Pulp production ('000 ADMTs) 349.5  373.4  364.9 1,468.3  1,453.7 Scheduled production downtime ('000 ADMTs) 18.1  10.2  27.9 50.9  52.4 Pulp sales ('000 ADMTs) 335.2  404.3  400.0 1,473.5  1,427.9 Average NBSK pulp list price in Europe ($/ADMT)(1) 803  777  868 813  956 Average NBSK pulp list price in Europe (€/ADMT) 619  620  644 632  687 Average pulp sales realizations (€/ADMT)(2) 504  501  527 511  574 Energy production ('000 MWh) 405.9  436.5  409.5 1,704.1   1,640.4 Energy sales ('000 MWh) 163.8  181.3  169.0 710.2  652.1 Average spot currency exchange rates:         € / $(3) 0.7707  0.7999  0.7425 0.7782  0.7186 C$ / $(3) 0.9912  0.9954  1.0227 0.9995   0.9887 C$ / €(4) 1.2862  1.2452  1.3788 1.2850  1.3761           (1) Source: RISI pricing report. (2) Average realized pulp prices for the periods indicated reflect customer discounts and pulp price movements between the order and shipment date. (3) Average Federal Reserve Bank of New York noon spot rate over the reporting period. (4) Average Bank of Canada noon spot rate over the reporting period.President's Comments Mr. Jimmy S.H. Lee, President and Chairman, stated: "Overall, our fourth quarter and 2012 results reflect generally weak NBSK pulp prices due to continued economic uncertainty in Europe and China. However, our mills generally performed well in 2012 as we achieved record annual pulp production and sales volumes. We also set an annual record for energy and chemical sales in 2012 as sales increased by approximately 6% to €72.3 million from €68.1 million in 2011. The sale of surplus renewable energy provides us with a stable income source unrelated to cyclical movements in pulp pricing and increasing the same is a continuing focus for us." Mr. Lee continued: "In the fourth quarter of 2012, although pulp supply and demand was generally balanced, prices were mostly stagnant with only marginal price increases. At the end of 2012, list prices in Europe were approximately $810 per ADMT and in North America and China were approximately $870 and $655 per ADMT, respectively." Mr. Lee added: "In 2012, we continued to implement capital projects designed to enhance our mills' operating efficiencies and increase pulp and energy production. We completed an upgrade to the Rosenthal mill's recovery boiler in mid-2012 to increase production capacity and lower operating costs and emissions. In 2012, our Stendal mill commenced Project Blue Mill which is designed to increase its pulp and green energy production capacity by approximately 30,000 ADMTs and 109,000 MWh, respectively. The project is currently on schedule and budget and is currently expected to be completed and start to generate power sales in or about September 2013."  Mr. Lee concluded: "Although pulp prices currently remain weak, we believe supply and demand to be balanced and the market should emerge from the current pricing environment in 2013. We believe the announced huge expansion of tissue production capacity in China of over 2.3 million ADMTs by 2015, along with the indefinite curtailment of approximately 320,000 ADMTs of pulp production by two Canadian mills, will further support price improvement. Looking ahead, we are starting to see NBSK prices beginning to firm up and expect that a modest price recovery will continue into 2013. Overall we believe that, with continuing strong performance at our mills, along with increased energy revenues from initiatives like Project Blue Mill and improving market conditions, we are well positioned for 2013."Three Months Ended December 31, 2012 Compared to Three Months Ended December 31, 2011 Total revenues for the three months ended December 31, 2012 decreased to €188.4 million ($244.4 million) from €231.6 million ($312.1 million) in the same period in 2011. Pulp revenues for the three months ended December 31, 2012 decreased by approximately 20% to €171.3 million from €213.2 million in the comparative period of 2011, primarily due to lower average pulp sales realizations and pulp sales volumes during the period, partially offset by a stronger U.S. dollar relative to the Euro. Energy and chemical revenues decreased by approximately 6% in the fourth quarter of 2012 to €17.2 million from €18.3 million in the same quarter last year, as a result of lower pulp production. Pulp production decreased to 349,517 ADMTs in the current quarter from 364,876 ADMTs in the same quarter of 2011, primarily due to greater than planned maintenance downtime at our Celgar mill, partially offset by record production at our Rosenthal mill. In the current quarter, equipment and process disruptions at the Celgar mill resulted in approximately 14,000 ADMTs of lost production.We took ten days (approximately 18,100 ADMTs) of scheduled maintenance downtime at our Stendal mill in the fourth quarter of 2012, compared to 15 days (approximately 27,900 ADMTs) in the same quarter of 2011. We currently have no scheduled maintenance downtime for the first quarter of 2013. Pulp sales volumes decreased by approximately 16% and 17% to 335,215 ADMTs in the current quarter from 400,005 ADMTs and 404,301 ADMTs in the comparative and prior quarters, respectively, primarily as a result of lower sales to China. Pulp sales volumes in the comparative and prior quarters were particularly strong as a result of strong sales volumes to China. Average pulp sales realizations decreased by 4% to €504 ($654) per ADMT in the fourth quarter of 2012, compared to €527 ($710) per ADMT in the same period last year, due to lower NBSK pulp prices. Costs and expenses in the fourth quarter of 2012 decreased by approximately 21% to €181.2 million from €228.6 million in the comparative period of 2011, primarily due to lower pulp sales volumes and fiber costs at our mills. Our costs and expenses in the current quarter included approximately €6.4 million for regularly scheduled maintenance costs. Several competing producers and members of the peer group that we benchmark our performance against now report their financial results in accordance with International Financial Reporting Standards which permit a significant portion of such maintenance costs to be capitalized instead of expensed. Such costs are not charged to EBITDA by the peer group companies but instead are expensed as depreciation. On average, our per unit fiber costs in the current quarter decreased by approximately 8% from the same period in 2011, due to lower fiber costs in Germany caused by reduced demand from other regional residual fiber users and in British Columbia caused by increased chip supply resulting from increased regional sawmill activity. We currently expect fiber costs at our German mills to increase slightly in the short- to mid-term, primarily due to higher demand from pellet and board producers which has been compounded by winter weather conditions limiting wood supply, though we expect these costs to be partially offset by price decreases in Canada as a result of strong sawmill activity. Selling, general and administrative expenses decreased to €9.6 million in the fourth quarter of 2012, compared to €11.4 million in the fourth quarter of 2011. For the fourth quarter of 2012, operating income increased to €7.3 million from €3.0 million in the comparative quarter of 2011, primarily due to lower fiber costs and a stronger U.S. dollar against the Euro, partially offset by lower average pulp sales realizations. Interest expense in the fourth quarter of 2012 decreased to €13.7 million from €14.1 million in the comparative quarter of 2011, primarily due to lower debt levels associated with the Stendal mill in 2012. Our Stendal mill recorded an unrealized gain of €2.3 million on the interest rate derivative in the current quarter, compared to an unrealized loss of €0.8 million in the same quarter of last year. We also recorded a gain of approximately €0.1 million related to a series of fixed price pulp swap contracts entered into in 2012. In each of the fourth quarters of 2012 and 2011, the noncontrolling shareholder's interest in the Stendal mill's loss was €1.2 million. In the fourth quarter of 2012, Operating EBITDA increased to €21.3 million from €17.0 million in the fourth 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 10 of the financial tables included in the press release for a reconciliation of net income (loss) to Operating EBITDA. We reported a net loss of €5.2 million, or €0.09 per basic and diluted share, for the fourth quarter of 2012, compared to a net loss of €1.8 million, or €0.03 per basic and diluted share, in the fourth quarter of 2011.Year Ended December 31, 2012 Compared to Year Ended December 31, 2011 Total revenues for 2012 decreased to €834.1 million ($1,072.7 million) from €899.5 million ($1,252.0 million) in 2011. Pulp revenues for 2012 decreased by approximately 8% to €761.9 million from €831.4 million in 2011, primarily due to lower average pulp sales realizations, partially offset by higher pulp sales volumes and a stronger U.S. dollar relative to the Euro. Energy and chemical revenues increased by approximately 6% in 2012 to an annual record of €72.3 million from €68.1 million in 2011, primarily as a result of record pulp production. Pulp sales volumes increased by approximately 3% to a record 1,473,519 ADMTs in 2012 from 1,427,924 ADMTs in 2011, primarily as a result of increased sales to China. Average pulp sales realizations decreased by 11% to €511 per ADMT in 2012, compared to €574 per ADMT in 2011, primarily due to lower pulp prices, only partially offset by a stronger U.S. dollar relative to the Euro. Costs and expenses in 2012 marginally decreased to €785.1 million, compared to €788.4 million in 2011, primarily due to lower costs for fiber, partially offset by higher pulp sales volumes. On average, our per unit fiber costs in 2012 decreased by approximately 7% from 2011, primarily due to lower fiber costs in Germany caused by decreased demand from the European particle board industry and other regional residual fiber users. Fiber costs at our Celgar mill were higher, primarily due to the impact of foreign exchange changes more than offsetting improved wood chip availability for the region. We currently expect fiber costs at our German mills to increase slightly in the short- to mid-term, primarily due to higher demand from pellet and board producers which has been compounded by winter weather conditions limiting wood supply, though we expect these costs to be partially offset by price decreases in Canada as a result of strong sawmill activity in British Columbia. For 2012, operating income decreased to €49.0 million from €111.1 million in 2011, primarily due to lower average pulp sales realizations, partially offset by a stronger U.S. dollar relative to the Euro and lower fiber costs. Interest expense in 2012 decreased to €55.8 million from €59.0 million in 2011, primarily due to reduced debt levels associated with our Stendal mill and the conversion of our remaining convertible notes in 2011. In 2012, Operating EBITDA decreased to €107.1 million from €167.1 million in 2011.(1) We reported a net loss of €12.2 million, or €0.22 per basic and diluted share, for 2012, which included a total non-cash unrealized gain of €2.5 million on Stendal interest rate and pulp price derivatives. In 2011, we reported net income of €50.1 million, or €1.00 per basic and €0.89 per diluted share, which included a non-cash unrealized loss of €1.4 million on the Stendal interest rate derivative. _________________________(1) See page 10 of the financial tables included in the press release for limitations on the use of Operating EBITDA as an analytical tool and a reconciliation of net income (loss) to Operating EBITDA.Liquidity and Capital Resources The following table is a summary of selected financial information as at the dates indicated:     Year Ended December 31,    2012   2011    (in thousands)Financial Position       Cash and cash equivalents  € 104,239  € 105,072   Marketable securities   184  12,372(1) Working capital   208,573   247,159   Total assets   1,183,603   1,217,250   Long-term liabilities   768,253   807,641   Total equity   278,925   283,542           (1) Principally comprised of German federal government bonds with a maturity of less than one year.         As at December 31, 2012, we had approximately €26.2 million and C$24.0 million available under our Rosenthal and Celgar facilities, respectively. During 2012, our Stendal mill reduced its bank indebtedness by €24.6 million and, at December 31, 2012, €452.9 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 (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:     Year Ended December 31,    2012   2011    (in thousands)Financial Position       Cash and cash equivalents  € 36,714  € 44,829   Marketable securities   184  12,372(1) Working capital   132,130  149,973   Total assets   644,119  658,844   Long-term liabilities   260,185  262,770   Total equity   335,353  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 Thursday, February 14, 2013 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through March 16, 2013, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm?eventid=125198&CompanyID=MERC&e=1&mediaKey=1AE35D7DABC3ECD95E2779DA87354812 or through a link on our 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. 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 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. Words such as "expects", "anticipates", "projects", "intends", "designed", "will", "believes", "estimates", "may", "could" and variations of such words and similar expressions are intended to identify such forward-looking statements. 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(Unaudited)(In thousands of Euros)        December 31, 20122011ASSETS      Current assets     Cash and cash equivalents € 104,239 € 105,072 Marketable securities  --  12,216 Receivables  110,087  120,487 Inventories  118,300  120,539 Prepaid expenses and other  7,907  8,162 Deferred income tax  4,465  6,750 Total current assets  344,998  373,226       Long-term assets     Property, plant and equipment  808,878  820,974 Deferred note issuance and other  12,162  10,763 Deferred income tax  17,565  12,287    838,605  844,024 Total assets € 1,183,603 € 1,217,250      LIABILITIES     Current liabilities     Accounts payable and other € 89,950 € 99,640 Pension and other post-retirement benefit obligations  813  756 Debt  45,662  25,671 Total current liabilities  136,425  126,067       Long-term liabilities     Debt  665,741  708,415 Unrealized interest rate derivative losses  50,678  52,391 Pension and other post-retirement benefit obligations  32,141  31,197 Capital leases and other  13,936  13,053 Deferred income tax  5,757  2,585    768,253  807,641 Total liabilities  904,678  933,708      EQUITY     Shareholders' equity     Share capital  248,371  247,642 Paid-in capital  (3,547)    (4,857) Retained earnings  25,800  37,985 Accumulated other comprehensive income  25,181  21,346 Total shareholders' equity  295,805  302,116 Noncontrolling deficit  (16,880)  (18,574) Total equity  278,925  283,542 Total liabilities and equity € 1,183,603 € 1,217,250                        MERCER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(In thousands of Euros, except per share data)    Three Months Ended  December 31, Year Ended  December 31,   2012  2011  2012  2011            Revenues          Pulp € 171,257 € 213,238 € 761,854 € 831,396  Energy and chemicals  17,191  18,347  72,289  68,079    188,448  231,585  834,143  899,475 Costs and expenses          Operating costs  157,582  203,288  689,052  693,825  Operating depreciation and amortization  13,992  13,983  57,776  55,760    16,874  14,314  87,315  149,890  Selling, general and administrative expenses  9,622  11,357  38,310  38,771 Operating income  7,252  2,957  49,005  111,119           Other income (expense)          Interest expense  (13,725)  (14,089)  (55,805)  (58,995)  Gain (loss) on derivative instruments  2,405  (838)  3,741  (1,418)  Foreign exchange gain (loss) on debt  --  (97)  --  1,175  Loss on extinguishment of debt--  (2)  (81)  (71)  Other income (expense)  122  768  (58)  1,501 Total other income (expense)  (11,198)  (14,258)  (52,203)  (57,808) Income (loss) before income taxes  (3,946)  (11,301)  (3,198)  53,311 Income tax benefit (provision)          – current  (204)  2,172  (7,411)  (1,682) – deferred  (2,182)  6,084  118  2,377 Net income (loss)   (6,332)  (3,045)  (10,491)  54,006 Less: net loss (income) attributable to noncontrolling interest  1,171  1,244  (1,694)  (3,931) Net income (loss) attributable to common shareholders € (5,161) € (1,801) € (12,185) € 50,075           Net income (loss) per share attributable to common shareholders          Basic € (0.09) € (0.03) € (0.22) € 1.00  Diluted € (0.09) € (0.03) € (0.22) € 0.89  MERCER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(In thousands of Euros)   For the Year Ended December 31, 201220112010 Cash flows from (used in) operating activities       Net income (loss) € (10,491) € 54,006 € 94,748 Adjustments to reconcile net income (loss) to cash flows from operating activities       Unrealized loss (gain) on derivative instruments  (2,477)  1,418  (1,899) Foreign exchange loss (gain) on debt  --  (1,175)  6,126 Loss on extinguishment of debt  81  71  7,494 Depreciation and amortization  58,052  56,005  56,231 Deferred income taxes  (118)  (2,377)  (9,760) Stock compensation expense  2,039  3,310  2,394 Pension and other post-retirement expense, net of funding  284  (269)  418 Other  3,801  1,905  7,682 Changes in working capital       Receivables  8,394  (1,604)  (40,038) Inventories  1,342  (17,713)  (24,462) Accounts payable and accrued expenses  (13,990)  14,252  (3,089) Other  (944)  3,226  (4,566) Net cash from (used in) operating activities  45,973  111,055  91,279         Cash flows from (used in) investing activities       Purchase of property, plant and equipment  (36,704)  (37,809)  (38,300) Proceeds on sale of property, plant and equipment  653  813  1,138 Purchase of marketable securities  --  (12,187)  -- Proceeds on maturity of marketable securities  12,213  --  -- Note receivable  --  2,865  1,113 Net cash from (used in) investing activities  (23,838)  (46,318)  (36,049)         Cash flows from (used in) financing activities       Repayment of notes payable and debt  (27,254)  (49,193)  (234,582) Proceeds from borrowings of note payable and debt  --  --  222,177 Repayment of capital lease obligations  (2,125)  (2,942)  (2,920) Proceeds from (repayment of) credit facilities, net  4,559  (14,652)  (2,660) Payment of note issuance costs  (1,933)  --  (6,095) Proceeds from government grants  3,888  14,199  17,952 Purchase of treasury shares  --  (7,476)  -- Net cash from (used in) financing activities  (22,865)  (60,064)  (6,128)         Effect of exchange rate changes on cash and cash equivalents  (103)  1,377  (1,371)         Net increase (decrease) in cash and cash equivalents  (833)  6,050  47,731 Cash and cash equivalents, beginning of year  105,072  99,022  51,291 Cash and cash equivalents, end of year € 104,239 € 105,072 € 99,022  MERCER INTERNATIONAL INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURECombined Condensed Balance Sheets(Unaudited)(In thousands of Euros)   The terms of the indenture governing our 9.5% Senior 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 year ended December 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.      December 31, 2012 RestrictedUnrestricted Consolidated GroupSubsidiariesEliminationsGroupASSETS         Current assets         Cash and cash equivalents € 36,714 € 67,525 € -- € 104,239 Receivables  61,212  48,875  --  110,087 Inventories  74,786  43,514  --  118,300 Prepaid expenses and other  5,811  2,096  --  7,907 Deferred income tax  2,188  2,277  --  4,465 Total current assets  180,711  164,287  --  344,998           Long-term assets         Property, plant and equipment  345,311  463,567  --  808,878 Deferred note issuance and other  6,607  5,555  --  12,162 Deferred income tax  9,179  8,386  --  17,565 Due from unrestricted group  102,311  --  (102,311)  -- Total assets  € 644,119 € 641,795 € (102,311) € 1,183,603          LIABILITIES         Current liabilities         Accounts payable and other € 42,106 € 47,844 € -- € 89,950 Pension and other post-retirement benefit obligations  813  --  --  813 Debt  5,662  40,000  --  45,662 Total current liabilities  48,581  87,844  --  136,425           Long-term liabilities         Debt  216,214  449,527  --  665,741 Due to restricted group  --  102,311  (102,311)  -- Unrealized interest rate derivative losses  --  50,678  --  50,678 Pension and other post-retirement benefit obligations  32,141  --  --  32,141 Capital leases and other  6,073  7,863  --  13,936 Deferred income tax  5,757  --  --  5,757 Total liabilities  308,766  698,223  (102,311)  904,678          EQUITY         Total shareholders' equity (deficit)  335,353  (39,548)  --  295,805 Noncontrolling deficit  --  (16,880)  --  (16,880) Total liabilities and equity € 644,119 € 641,795 € (102,311) € 1,183,603                    MERCER INTERNATIONAL INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURECombined Condensed Balance Sheets(Unaudited)(In thousands of Euros)   December 31, 2011 RestrictedUnrestricted Consolidated GroupSubsidiariesEliminationsGroupASSETS         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  MERCER INTERNATIONAL INC.   RESTRICTED GROUP SUPPLEMENTAL DISCLOSURECombined Condensed Statements of Operations(Unaudited)(In thousands of Euros)      Three Months Ended December 31, 2012    Restricted  Group Unrestricted Subsidiaries  EliminationsConsolidated  Group  Revenues          Pulp € 97,532  € 73,725  € -- € 171,257  Energy and chemicals  7,078   10,113  --  17,191    104,610   83,838   --  188,448 Operating costs  86,053  71,529  --  157,582 Operating depreciation and amortization  7,445  6,547--  13,992 Selling, general and administrative expenses  6,321   3,301  --  9,622    99,819   81,377  --  181,196 Operating income  4,791   2,461--  7,252           Other income (expense)           Interest expense  (5,671)  (9,601)  1,547  (13,725)   Gain (loss) on derivative instruments  56  2,349--  2,405   Other income (expense)  1,622   47   (1,547)  122 Total other income (expense)  (3,993)   (7,205)--  (11,198) Income (loss) before income taxes  798  (4,744)--  (3,946) Income tax benefit (provision)  (2,177)   (209)  --  (2,386) Net income (loss)  (1,379)  (4,953)--  (6,332) Less: net loss attributable to noncontrolling interest--   1,171--  1,171 Net income (loss) attributable to common shareholders € (1,379)  € (3,782)  € -- € (5,161)        Three Months Ended December 31, 2011    Restricted  Group Unrestricted Subsidiaries  EliminationsConsolidated  Group  Revenues          Pulp € 121,894  € 91,344  € -- € 213,238  Energy and chemicals  7,805   10,542  --  18,347    129,699   101,886  --  231,585 Operating costs  110,393  92,895  --  203,288 Operating depreciation and amortization  7,462  6,521  --  13,983 Selling, general and administrative expenses  6,554   4,803  --  11,357    124,409   104,219--  228,628 Operating income (loss)  5,290   (2,333)   --  2,957           Other income (expense)          Interest expense  (5,684)  (9,670)  1,265  (14,089)  Loss on derivative instruments  --  (838)  --  (838)  Foreign exchange loss on debt  (97)   ----  (97)  Loss on extinguishment of debt  (2)  --  --  (2)  Other income (expense)  1,344   689   (1,265)  768 Total other income (expense)  (4,439)   (9,819)  --  (14,258) Income (loss) before income taxes  851  (12,152)--  (11,301) Income tax benefit (provision)  1,327   6,929  --  8,256 Net income (loss)  2,178  (5,223)--  (3,045) Less: net loss attributable to noncontrolling interest  --   1,244--  1,244 Net income (loss) attributable to common shareholders € 2,178  € (3,979)  € -- € (1,801)  MERCER INTERNATIONAL INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURECombined Condensed Statements of Operations(Unaudited)(In thousands of Euros)     Year Ended December 31, 2012  RestrictedUnrestricted Consolidated  GroupSubsidiariesEliminationsGroup Revenues         Pulp € 423,943 € 337,911 € -- € 761,854 Energy and chemicals  28,489  43,800  --  72,289    452,432  381,711  --  834,143           Operating costs  388,966  300,086  --  689,052 Operating depreciation and amortization  31,195  26,581  --  57,776 Selling, general and administrative expenses  24,640  13,670  --  38,310    444,801  340,337  --  785,138 Operating income  7,631  41,374  --  49,005           Other income (expense)         Interest expense  (23,425)  (38,050)  5,670  (55,805) Gain (loss) on derivative instruments  2,028  1,713  --  3,741 Loss on extinguishment of debt  (81)  --  --  (81) Other income (expense)  5,108  504  (5,670)  (58) Total other income (expense)  (16,370)  (35,833)  --  (52,203) Income (loss) before income taxes  (8,739)  5,541  --  (3,198) Income tax benefit (provision)  (5,482)  (1,811)  --  (7,293) Net income (loss)  (14,221)  3,730  --  (10,491) Less: net income attributable to noncontrolling interest  --  (1,694)  --  (1,694) Net income (loss) attributable to common shareholders € (14,221) € 2,036 € -- € (12,185)      Year Ended December 31, 2011  RestrictedUnrestricted Consolidated  GroupSubsidiariesEliminationsGroup Revenues         Pulp € 473,992 € 357,404 € -- € 831,396 Energy and chemicals  25,473  42,606  --  68,079    499,465  400,010  --  899,475           Operating costs  382,555  311,270  --  693,825 Operating depreciation and amortization  29,841  25,919  --  55,760 Selling, general and administrative expenses  24,126  14,645  --  38,771    436,522  351,834  --  788,356 Operating income  62,943  48,176  --  111,119           Other income (expense)         Interest expense  (24,886)  (39,074)  4,965  (58,995) Gain (loss) on derivative instruments  --  (1,418)  --  (1,418) Foreign exchange gain (loss) on debt  1,175  --  --  1,175 Loss on extinguishment of debt  (71)  --  --  (71) Other income (expense)  5,262  1,204  (4,965)  1,501 Total other income (expense)  (18,520)  (39,288)  --  (57,808) Income (loss) before income taxes  44,423  8,888  --  53,311 Income tax benefit (provision)  (4,614)  5,309  --  695 Net income (loss)  39,809  14,197  --  54,006 Less: net income attributable to noncontrolling interest  --  (3,931)  --  (3,931) Net income (loss) attributable to common shareholders € 39,809 € 10,266 € -- € 50,075  MERCER INTERNATIONAL INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURECombined Condensed Statements of Cash Flows(Unaudited)(In thousands of Euros)     Year Ended December 31, 2012  RestrictedUnrestrictedConsolidated  GroupSubsidiariesGroup Cash flows from (used in) operating activities       Net income (loss) € (14,221) € 3,730 € (10,491) Adjustments to reconcile net income (loss) to cash flows from operating activities       Unrealized loss (gain) on derivative instruments  (764)  (1,713)  (2,477) Loss on extinguishment of debt  81  --  81 Depreciation and amortization  31,471  26,581  58,052 Deferred income taxes  5,179  (5,297)  (118) Stock compensation expense  2,039  --  2,039 Pension and other post-retirement expense, net of funding  284  --  284 Other  1,144  2,657  3,801 Changes in working capital       Receivables  (587)  8,981  8,394 Inventories  (3,991)  5,333  1,342 Accounts payable and accrued expenses  (7,446)  (6,544)  (13,990) Other(1)  (15,779)  14,835  (944) Net cash from (used in) operating activities  (2,590)  48,563  45,973         Cash flows from (used in) investing activities       Purchase of property, plant and equipment  (21,937)  (14,767)  (36,704) Proceeds on sale of property, plant and equipment  365  288  653 Proceeds on maturity of marketable securities  12,213  --  12,213 Net cash from (used in) investing activities  (9,359)  (14,479)  (23,838)         Cash flows from (used in) financing activities       Repayment of notes payable and debt  (2,671)  (24,583)  (27,254) Repayment of capital lease obligations  (735)  (1,390)  (2,125) Proceeds from (repayment of) credit facilities, net  4,559  --  4,559 Payment of note issuance costs  (312)  (1,621)  (1,933) Proceeds from government grants  3,096  792   3,888 Net cash from (used in) financing activities  3,937  (26,802)  (22,865)         Effect of exchange rate changes on cash and cash equivalents  (103)  --  (103)         Net increase (decrease) in cash and cash equivalents  (8,115)  7,282  (833) Cash and cash equivalents, beginning of year  44,829  60,243  105,072 Cash and cash equivalents, end of year € 36,714 € 67,525 € 104,239         (1) Includes intercompany related transactions        MERCER INTERNATIONAL INC. RESTRICTED GROUP SUPPLEMENTAL DISCLOSURECombined Condensed Statements of Cash Flows(Unaudited)(In thousands of Euros)     Year Ended December 31, 2011  RestrictedUnrestrictedConsolidated  GroupSubsidiariesGroup Cash flows from (used in) operating activities       Net income (loss) € 39,809 € 14,197 € 54,006 Adjustments to reconcile net income (loss) to cash flows       from operating activities       Unrealized loss (gain) on derivative instruments  --  1,418  1,418 Foreign exchange loss (gain) on debt  (1,175)  --  (1,175) Loss on extinguishment of debt  71  --  71 Depreciation and amortization  30,086  25,919  56,005 Deferred income taxes  2,989  (5,366)  (2,377) Stock compensation expense  3,310  --  3,310 Pension and other post-retirement expense, net of funding  (269)  --  (269) Other  1,413  492  1,905 Changes in working capital       Receivables  3,255  (4,859)  (1,604) Inventories  (10,175)  (7,538)  (17,713) Accounts payable and accrued expenses  5,868  8,384  14,252 Other(1)  (8,503)  11,729  3,226 Net cash from (used in) operating activities  66,679  44,376  111,055         Cash flows from (used in) investing activities       Purchase of property, plant and equipment  (29,513)  (8,296)  (37,809) Proceeds on sale of property, plant and equipment  327  486  813 Purchase of marketable securities  (12,187)  --  (12,187) Note receivable  2,865  --  2,865 Net cash from (used in) investing activities  (38,508)  (7,810)  (46,318)         Cash flows from (used in) financing activities       Repayment of notes payable and debt  (26,026)  (23,167)  (49,193) Repayment of capital lease obligations  (1,310)  (1,632)  (2,942) Proceeds from (repayment of) credit facilities, net  (14,652)  --  (14,652) Proceeds from government grants  14,091  108  14,199 Purchase of treasury shares  (7,476)  --  (7,476) Net cash from (used in) financing activities  (35,373)  (24,691)  (60,064)         Effect of exchange rate changes on cash and cash equivalents  1,377  --  1,377         Net increase (decrease) in cash and cash equivalents  (5,825)  11,875  6,050 Cash and cash equivalents, beginning of year  50,654  48,368  99,022 Cash and cash equivalents, end of year € 44,829 € 60,243 € 105,072         (1) Includes intercompany related transactions.        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 (loss) 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. 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 December 31, Year Ended December 31,   2012  2011  2012  2011   (in thousands)(in thousands) Net income (loss) attributable to common shareholders € (5,161) € (1,801) € (12,185) € 50,075 Net income (loss) attributable to noncontrolling interest  (1,171)  (1,244)  1,694  3,931 Income tax provision (benefits)  2,386  (8,256)  7,293  (695) Interest expense  13,725  14,089  55,805  58,995 Loss (gain) on derivative instruments  (2,405)  838  (3,741)  1,418 Foreign exchange loss (gain) on debt  --  97--  (1,175) Loss on extinguishment of debt--  2  81  71 Other expense (income)  (122)  (768)  58  (1,501) Operating income  7,252  2,957  49,005  111,119 Add: Depreciation and amortization  14,060  14,045  58,052  56,005 Operating EBITDA € 21,312 € 17,002 € 107,057 € 167,124        Three Months Ended December 31, Year Ended December 31,   2012  2011  2012  2011   (in thousands)(in thousands)Restricted Group         Net income (loss)(1) € (1,379) € 2,178 € (14,221) € 39,809 Income tax provision (benefits)   2,177  (1,327)   5,482  4,614 Interest expense  5,671  5,684  23,425  24,886 Gain on derivative instruments  (56)  --  (2,028)  -- Foreign exchange loss (gain) on debt  --  97--  (1,175) Loss on extinguishment of debt--  2  81  71 Other expense (income)  (1,622)  (1,344)  (5,108)  (5,262) Operating income  4,791  5,290  7,631  62,943 Add: Depreciation and amortization  7,513  7,524  31,471  30,086 Operating EBITDA € 12,304 € 12,814 € 39,102 € 93,029           (1) For the Restricted Group, net income (loss) attributable to common shareholders and net income (loss) are the same.  CONTACT: APPROVED BY: Jimmy S.H. Lee Chairman, CEO & President (604) 684-1099 David M. Gandossi Executive Vice-President, Chief Financial Officer & Secretary (604) 684-1099