Mercer International Inc. Reports 2004 Fourth Quarter and Year End
Results NEW YORK, March 11 /PRNewswire-FirstCall/ -- Mercer
International Inc. (NASDAQ:MERCSNASDAQ:TSX:NASDAQ:MRI.U) today
reported results for the fourth quarter and year ended December 31,
2004. Such results do not include the operations of the Celgar NBSK
pulp mill which has an annual production capacity of approximately
430,000 ADMTs that we acquired in February 2005. In addition, our
new Stendal NBSK pulp mill with an annual production capacity of
approximately 552,000 ADMTs only commenced production in
mid-September 2004. Results of Operations - 2004 Fourth Quarter
Total revenues for the 2004 fourth quarter increased to euro 94.0
million from euro 50.4 million in the comparative period of 2003,
primarily because of higher pulp sales resulting from the start up
of production at our Stendal mill. Pulp and paper revenues were
euro 88.0 million in the current period, versus euro 47.5 million
in the comparative period of 2003. During the fourth quarter of
2004, the Stendal mill produced approximately 118,775 ADMTs of NBSK
pulp and had sales of euro 41.2 million. Costs of pulp and paper
sales in the fourth quarter of 2004 increased to euro 98.4 million
from euro 45.5 million in the comparative period of 2003, primarily
as a result of the inclusion of production from our Stendal mill.
In the 2004 fourth quarter, pulp sales increased to euro 74.8
million from euro 34.2 million in the comparative period of 2003 as
a result of the inclusion of production from our Stendal mill and
higher production from our Rosenthal mill. List prices for NBSK
pulp in Europe were approximately euro 446 ($603) per ADMT in the
fourth quarter of 2004, compared to approximately euro 519 ($635)
per ADMT in the prior quarter and euro 444 ($560) per ADMT in the
comparative period of last year. The increase in U.S. list prices
for NBSK pulp over the 2003 comparative period was largely offset
by the weakness of the U.S. dollar versus the Euro in the current
period. In the fourth quarter of 2004, pulp sales by volume
increased to 192,254 ADMTs from 81,729 ADMTs in the fourth quarter
of 2003. Pulp sales realizations decreased to euro 389 per ADMT on
average in the 2004 fourth quarter, from euro 418 per ADMT in the
comparative period of 2003, primarily as a result of lower price
realizations of the Stendal mill associated with its start up.
Transportation and other revenues for the pulp operations increased
to euro 5.3 million in the 2004 fourth quarter from euro 2.6
million in the comparative period last year, primarily as a result
of the start up of our Stendal mill. Cost of sales and general,
administrative and other expenses for the pulp operations increased
to euro 91.8 million in the 2004 fourth quarter from euro 36.6
million in comparative period of 2003, primarily as a result of the
inclusion of euro 57.6 million of operating costs related to the
Stendal mill. On average, fiber costs for pulp production at our
Rosenthal mill decreased by approximately 2.8% compared to the
comparative period last year. Depreciation for the pulp operations
was euro 11.8 million in the current period, versus euro 5.6
million in the comparative period of 2003. For the 2004 fourth
quarter, the pulp operations generated an operating loss of euro
10.7 million, versus operating income of euro 0.3 million in the
2003 fourth quarter, primarily as a result of an operating loss of
approximately euro 13.3 million from our Stendal mill. The
operating loss from our Stendal mill resulted primarily from the
higher production costs and lower price realizations it incurred
during its initial start up. Paper sales were euro 13.3 million in
the fourth quarter of 2004 and 2003. Sales of specialty papers in
the 2004 fourth quarter decreased marginally to euro 9.5 million
from euro 9.9 million in the comparative period of 2003 as a result
of a shift in the product mix. For the fourth quarter of 2004,
total paper sales volumes were 14,781 ADMTs, versus 15,030 ADMTs in
the fourth quarter of 2003. On average, prices for specialty papers
realized in the fourth quarter of 2004 increased by approximately
3.9%, reflecting a shift in the product mix. Average prices for our
printing papers decreased by approximately 1.7% reflecting
generally weak demand. Cost of sales and general, administrative
and other expenses for the paper operations in the fourth quarter
of 2004 decreased to euro 12.9 million from euro 15.3 million in
the fourth quarter of 2003, primarily as a result of lower
operating costs. Depreciation for the paper operations was euro 0.6
million in the fourth quarter of 2004, compared to euro 0.5 million
in the fourth quarter of 2003. For the 2004 fourth quarter, our
paper operations generated operating income of euro 0.8 million,
compared to an operating loss of euro 1.5 million in the
comparative period last year. In the 2004 fourth quarter, we had a
loss from operations of euro 10.3 million, compared to euro 2.0
million in the comparative period of last year, primarily as a
result of a loss from operations of euro 13.3 million from our
Stendal mill. Interest expense in the 2004 fourth quarter increased
to euro 14.2 million from euro 4.6 million in the 2003 fourth
quarter, due to the inclusion of interest expense of euro 10.3
million relating to the Stendal pulp mill after it was started up
in mid-September 2004. In the 2004 fourth quarter, we realized a
gain of approximately euro 29.7 million before minority interests
upon the settlement of the currency derivatives entered into by our
Rosenthal and Stendal pulp mills (the "Currency Derivatives") due
to the weakening of the U.S. dollar versus the Euro. In the
comparable period of 2003, we realized a gain of euro 10.1 million
before minority interests on the settlement of our then outstanding
currency derivatives. In the 2004 fourth quarter, we also recorded
a net non-cash holding loss of euro 16.5 million before minority
interests on the marked to market valuation of the interest rate
derivative contracts entered into by our Rosenthal and Stendal pulp
mills (the "Interest Rate Contracts") versus a net gain of euro 9.7
million before minority interests thereon in the 2003 fourth
quarter. During the fourth quarter of 2004, we completed a
reorganization of certain of our German subsidiary companies and
tax field audits for years prior to 2001 of certain of our German
subsidiaries were completed. As a result, we re-evaluated our
income tax provision and deferred income tax asset valuation
allowance and recorded an income tax benefit of euro 44.2 million
for the year ended December 31, 2004. In the 2004 fourth quarter,
minority interest, representing the two minority shareholders'
proportionate interest in the Stendal mill, was euro (1.5) million,
compared to euro (2.9) million in the comparative period of 2003.
In the 2004 fourth quarter, net income was euro 32.6 million, or
euro 1.87 per basic share and euro 1.14 per diluted share, which
reflected the positive impact of the net gain on derivative
instruments and the income tax benefit, partially offset by the
loss from our Stendal mill resulting from its start up. In the 2003
fourth quarter, we reported net income of euro 5.6 million, or euro
0.33 per basic and diluted share. We generated "Operating EBITDA"
of euro 1.6 million and euro 3.9 million in the fourth quarter of
2004 and 2003, respectively. Operating EBITDA is defined as income
(loss) from operations plus depreciation and amortization and
non-recurring capital asset impairment charges. Operating EBITDA is
calculated by adding depreciation and amortization and
non-recurring capital asset impairment charges of euro 11.9 million
and euro 6.0 million to the loss from operations of euro 10.3
million and euro 2.0 million for the three months ended December
31, 2004 and 2003, respectively. 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. Some of these limitations are: (i)
Operating EBITDA does not reflect our cash expenditures, or future
requirements, for capital expenditures or contractual commitments;
(ii) Operating EBITDA does not reflect changes in, or cash
requirements for, working capital needs; (iii) Operating EBITDA
does not reflect the significant interest expense, or the cash
requirements necessary to service interest or principal payments,
on our outstanding debt; (iv) Operating EBITDA does not reflect
minority interests on our Stendal operations; (v) Operating EBITDA
does not reflect the impact of marked to market changes in our
derivative positions, which can be substantial; and (vi) Operating
EBITDA does not reflect the impact of impairment charges against
our investments or assets. Because of these limitations, Operating
EBITDA should only be considered as a supplemental performance
measure and should not be considered as a measure of liquidity or
cash available to us to invest in the growth of our business.
Because all companies do not calculate Operating EBITDA in the same
manner, Operating EBITDA as calculated by us may differ from
Operating EBITDA as calculated by other companies. We compensate
for these limitations by using Operating EBITDA as a supplemental
measure of our performance and relying primarily on our GAAP
financial statements. Results of Operations - 2004 Total revenues
for the year ended December 31, 2004 increased to euro 247.9
million from euro 194.6 million in the comparative period of 2003,
primarily because of higher pulp sales resulting from the inclusion
of production from our Stendal mill from mid-September 2004. Pulp
and paper revenues were euro 233.1 million in the current period,
versus euro 182.5 million in the comparative period of 2003. Costs
of pulp and paper sales in the year ended December 31, 2004
increased to euro 232.1 million from euro 179.7 million in the
comparative period of 2003, primarily as a result of the inclusion
of production from our Stendal mill. In the year ended December 31,
2004, pulp sales increased to euro 178.5 million from euro 126.6
million in 2003 as a result of higher prices and production from
our Rosenthal mill and the inclusion of production from our Stendal
mill. List prices for NBSK pulp in Europe were approximately euro
496 ($616) per ADMT in 2004, compared to approximately euro 453
($523) per ADMT last year. The increase in NBSK pulp prices was
partially offset by the weakness of the U.S. dollar versus the Euro
in 2004. In 2004, pulp sales by volume increased to 421,716 ADMTs
from 303,655 ADMTs in 2003. Pulp sales realizations increased to
euro 423 per ADMT on average in the year ended December 31, 2004
from euro 417 per ADMT in 2003, primarily as a result of higher
prices, partially offset by lower price realizations of the Stendal
mill associated with its start up. Transportation and other
revenues for the pulp operations increased to euro 14.2 million in
the year ended December 31, 2004 from euro 10.9 million last year
because of the start up of the Stendal mill. Cost of sales and
general, administrative and other expenses for the pulp operations
increased to euro 200.6 million in the year ended December 31, 2004
from euro 141.3 million in 2003, primarily as a result of the
inclusion of euro 65.6 million of operating costs related to the
Stendal mill. On average, fiber costs for pulp production at our
Rosenthal mill decreased by approximately 3.9% compared to last
year. Depreciation for the pulp operations was euro 26.8 million in
the current period, versus euro 21.9 million in 2003. For the year
ended December 31, 2004, the pulp operations generated an operating
loss of euro 5.1 million, versus an operating loss of euro 1.5
million last year, primarily as a result of a loss from operations
of euro 20.6 million from our Stendal mill. Such loss from our
Stendal mill resulted primarily from expensing certain costs
associated with the mill prior to its start up and the higher
production costs and lower price realizations it incurred during
its start up. Paper sales in the current period were euro 54.6
million, compared with euro 55.9 million in the same period of last
year. Sales of specialty papers in the year ended December 31, 2004
were euro 37.5 million versus euro 40.1 million in 2003, primarily
as a result of a shift in the product mix. For the year ended
December 31, 2004, total paper sales volumes were 62,282 ADMTs,
versus 62,018 ADMTs in the year ended December 31, 2003. On
average, prices for specialty papers realized in 2004 increased
slightly, reflecting a shift in the product mix. Average prices for
our printing papers decreased by approximately 6.4% reflecting
generally weak demand. Cost of sales and general, administrative
and other expenses for the paper operations in the year ended
December 31, 2004 increased to euro 65.2 million from euro 56.9
million in the year ended December 31, 2003, primarily as a result
of a non-cash euro 6.0 million impairment charge relating to our
paper operations. Depreciation for the paper operations was euro
2.4 million in the year ended December 31, 2004, compared to euro
2.0 million last year. For the year ended December 31, 2004, our
paper operations generated an operating loss of euro 9.8 million,
which included the non-cash impairment charge of euro 6.0 million,
compared to operating income of euro 0.1 million in 2003. In 2004,
we had a loss from operations of euro 18.0 million, compared to a
loss of euro 4.5 million last year, primarily as a result of a loss
from operations of euro 20.6 million from our Stendal mill and the
euro 6.0 million non-cash impairment charge related to our
Fahrbrucke paper mill. Interest expense (excluding capitalized
interest of euro 27.2 million relating to the Stendal pulp mill) in
the year ended December 31, 2004 increased to euro 23.7 million
from euro 11.5 million a year ago, due to higher borrowings
resulting primarily from our convertible note issue in October 2003
and the inclusion of interest expense of euro 12.2 million relating
to the Stendal mill after its start up in mid-September 2004. In
the year ended December 31, 2004, we realized a gain of euro 44.5
million before minority interests upon the settlement of the
Currency Derivatives due to the weakening of the U.S. dollar versus
the Euro in 2004. In 2003, we realized a gain of euro 29.3 million
before minority interests on our then outstanding currency
derivatives. In the year ended December 31, 2004, we also recorded
a non-cash holding loss of euro 32.3 million before minority
interests on the marked to market valuation of the Interest Rate
Contracts versus a net loss thereon of euro 13.2 million before
minority interests in 2003. Our results for 2003 included an
adjustment of euro 5.6 million for the non-cash impact of
other-than-temporary impairment losses on our available- for-sale
securities. In the year ended December 31, 2004, we re-evaluated
our income tax provision and deferred income tax asset valuation
allowance and recorded an income tax benefit of euro 44.2 million.
In the year ended December 31, 2004, minority interest,
representing the two minority shareholders' proportionate interest
in the Stendal mill, was euro 2.5 million, compared to euro 5.6
million in 2003. We reported net income for the year ended December
31, 2004 of euro 20.0 million, or euro 1.15 per basic share and
euro 0.89 per diluted share, which reflected the positive impact of
the net gain on derivative instruments and the income tax benefit,
partially offset by the loss from our Stendal mill. In 2003, we
reported a net loss of euro 3.6 million, or euro 0.21 per basic and
diluted share. We generated "Operating EBITDA" of euro 17.2 million
and euro 19.6 million in the years ended December 31, 2004 and
2003, respectively. 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. 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. At December 31,
2004, our cash and cash equivalents were euro 49.6 million,
compared to euro 52.0 million at the end of 2003. We also had euro
45.3 million of cash restricted to pay construction costs payable
and euro 19.1 million of cash restricted in a debt service account,
both related to the Stendal pulp mill. In addition, we had euro
28.5 million of cash restricted in a debt service account relating
to the project financing facility at the Rosenthal mill, which
facility was fully repaid in February 2005. At December 31, 2004,
we had a working capital deficit of euro 21.7 million, primarily
because we had Stendal construction costs payable of euro 65.4
million for which we had not yet drawn down under the Stendal
project loan facility and, under our accounting policies, we do not
record certain government grants until they are received. The
Stendal construction costs will be paid pursuant to the Stendal
project loan facility in the ordinary course. At December 31, 2004,
we qualified for investment grants related to the Stendal mill
totaling approximately euro 65.9 million from the federal and state
governments of Germany, which we expect to receive in 2005. These
grants, when received, will be applied to repay the amounts drawn
under the dedicated tranche of the Stendal project loan facility.
The grants are not reported in our income and reduce the cost basis
of the assets purchased when they are received. We expect to
qualify for additional investment grants totaling euro 22.6 million
when such Stendal construction costs have been substantially paid.
Stendal Pulp Mill Construction of the Stendal mill was completed in
the third quarter of 2004 and the mill is currently in the start-up
phase. The mill underwent extensive testing and evaluation in
December 2004 to determine whether certain performance requirements
have been met, referred to as the "Acceptance Test". The Acceptance
Test required that the mill continuously produce pulp at stated
volumes, and within certain product specifications, for a 72-hour
period. The test was generally successful and we were pleased with
both the quantitative and qualitative aspects of the test. We have
also reviewed the results of the test with Stendal's EPC
contractor, lenders and certain suppliers. Based on such review and
discussions with the parties to date, we currently anticipate that
Stendal will issue an acceptance certificate for the mill and
accept delivery of the same, subject to the EPC contractor and
certain suppliers implementing certain measures including the
installation of two additional digesters and related equipment,
improvements to the NCG boiler and water treatment plant,
reimbursement to Stendal of certain costs and the provision of
certain warranties. The mill is currently operating well and
product sales continue to be for the benefit of Mercer. The
installation of the two additional digesters will increase the
number of digesters at the Stendal mill from eight to ten and is
planned to be completed by November 30, 2005. Once installed and
fully operational, we believe the additional digesters should
increase the annual production capacity of the Stendal mill to in
excess of 600,000 ADMTs. We and our consultants believe that the
design and capacity of the rest of the mill and fiber availability
will, over time, permit the Stendal mill to achieve such increased
production volumes. The additional digesters are also expected to
enhance the reliability and overall operating performance of the
Stendal mill. The two additional digesters have a capital cost of
approximately euro 8 million, of which we will only pay euro 2
million and the balance shall be paid by the EPC contractor and
certain suppliers. The acceptance of the 72-hour test and the mill
and the implementation of certain measures are subject to, among
other things, the settlement and execution of a definitive
settlement agreement among the parties. Although no assurance can
be provided, we currently believe the parties will conclude a
definitive agreement around the end of the first quarter of 2005.
Celgar Pulp Mill Acquisition and Financing In February 2005, we
completed the acquisition of the Celgar pulp mill which is located
near Castlegar, British Columbia, Canada, and has an annual
production capacity of 430,000 ADMTs of NBSK pulp. The purchase
price was $210 million, of which $170 million was paid in cash and
$40 million was paid in our shares, plus an amount for the defined
working capital of the mill on closing of approximately $16
million. In conjunction with the acquisition, we sold $310 million
in principal amount of 9.25% senior notes maturing in 2013 and
approximately $91 million of our shares of beneficial interest by
way of separate public offerings. The proceeds from such offerings
of notes and shares, along with cash on hand, were utilized to pay
the cash portion of the purchase price and defined working capital
of the Celgar mill, transaction costs, and to repay in full all of
the net bank indebtedness of our Rosenthal mill and for working
capital. Effective upon closing of the acquisition, we also
established a new revolving working capital facility for the
Rosenthal mill in the amount of euro 40 million with an initial
term of five years and for the Celgar mill in the amount of $30
million, with an initial term of one year which, if not renewed,
will convert to a one-year term loan. President's Comments Mr.
Jimmy S.H. Lee, President and Chairman, stated: "Our results for
the fourth quarter and all of 2004 are reflective of generally
improved pulp markets, the weakening of the U.S. dollar versus the
Euro, the start up of our Stendal mill and continuing softness in
our paper markets. Although NBSK pulp prices generally improved
overall in 2004, such improvements were partially offset by the
weakening of the U.S. dollar which fell by approximately 7.5%
versus the Euro on a year over year basis. As result of the
weakening of the U.S. dollar, during the fourth quarter, we settled
all of the outstanding foreign currency derivatives we had put in
place and realized a gain of euro 44.5 million thereon." Mr. Lee
continued: "In early 2005, NBSK pulp prices have continued to
improve both because of improving customer demand and a weakening
U.S. dollar." Mr. Lee further stated: "We are pleased with the
start up of the Stendal mill which is proceeding substantially as
planned. It is producing a good quality of pulp that has been well
accepted by customers. In the fourth quarter of 2004, the mill
produced pulp at approximately 86% of its rated capacity." Mr. Lee
continued: "We are very excited about the acquisition of the Celgar
pulp mill which was completed in February 2005. We believe there
are a number of opportunities to enhance the performance of the
Celgar mill and expect to invest in certain strategic capital
projects at the mill over the next three years to reduce operating
costs, increase production capacity and enhance the operating
efficiency and reliability of the mill. The Celgar mill also
positions us to better service our customers by supplying them on a
global basis and diversifies our revenue and geographic sales mix."
Mr. Lee concluded: "The acquisition of the Celgar mill and the
start up of the Stendal mill makes us one of the largest NBSK pulp
producers in the world with a consolidated annual production
capacity of approximately 1.3 million ADMTs. We believe that our
three large, modern NBSK pulp mills provide us the best platform to
be an efficient, low-cost, competitive producer of high quality
NBSK pulp." In conjunction with this release, Mercer International
will host a conference call, which will be simultaneously broadcast
live over the Internet. Management will host the call, which is
scheduled for Friday, March 11, 2005 at 10:00 AM EST. Listeners can
access the conference call live and archived over the Internet
through a link at the company's web site at
http://www.mercerinternational.com/, or at
http://phx.corporate-ir.net/playerlink.zhtml?c=62074&s=wm&e=1030083.
Please allow 15 minutes prior to the call to visit the site and
download and install any necessary audio software. A replay of this
call will be available approximately two hours after the live call
ends until March 18, 2005 at 11:59 p.m. (Eastern Standard Time).
The replay number is (800) 642-1687, and the passcode is 4619545.
Mercer International Inc. is a global pulp and paper manufacturing
company. To obtain further information on the company, please visit
its web site at http://www.mercerinternational.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
AS OF DECEMBER 31, 2004 AND 2003 (Euros in thousands) December 31,
December 31, 2004 2003 ASSETS Current Assets Cash and cash
equivalents euro 49,568 euro 51,993 Cash restricted 45,295 15,187
Receivables 54,687 33,028 Inventories 52,898 23,909 Prepaid
expenses 4,961 4,284 Total current assets 207,409 128,401 Long-Term
Assets Cash restricted 47,538 44,180 Property, plant and equipment
936,035 745,178 Investments 983 1,644 Equity method investments
4,096 2,309 Deferred note issuance and acquisition costs 5,069
4,213 Deferred income tax 54,519 9,980 1,048,240 807,504 Total
assets euro 1,255,649 euro 935,905 LIABILITIES Current Liabilities
Accounts payable and accrued expenses euro 56,542 euro 37,414
Construction costs payable 65,436 42,756 Debt, current portion
107,090 97,178 Total current liabilities 229,068 177,348 Long-Term
Liabilities Debt, less current portion 228,488 255,901 Debt,
Stendal 548,784 324,238 Unrealized interest rate derivative loss
75,471 43,151 Capital leases and other 9,035 2,412 Deferred income
tax 2,062 - 863,840 625,702 Total liabilities 1,092,908 803,050
Minority Interest - - SHAREHOLDERS' EQUITY Shares of beneficial
interest 83,397 78,139 Additional paid-in capital, stock options 14
223 Retained earnings 69,176 49,196 Accumulated other comprehensive
income 10,154 5,297 Total shareholders' equity 162,741 132,855
Total liabilities and shareholders' equity euro 1,255,649 euro
935,905 MERCER INTERNATIONAL INC. CONSOLIDATED STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS For the Years Ended December 31,
2004 and 2003 (Euros in thousands, except per share data) 2004 2003
Revenues Pulp and paper euro 233,103 euro 182,456 Transportation
3,299 3,607 Other 11,496 8,493 247,898 194,556 Cost of sales Pulp
and paper 229,229 176,655 Transportation 2,873 3,035 Gross profit
15,796 14,866 General and administrative expenses (27,099) (19,323)
Impairment of capital assets (6,000) - Flooding losses and
expenses, less grant income (669) 957 Settlement expenses - (1,041)
Loss from operations (17,972) (4,541) Other income (expense)
Interest expense (23,749) (11,523) Investment income 2,948 1,653
Derivative financial instruments Unrealized loss on interest rate
derivatives (32,331) (13,153) Realized gain on foreign exchange
derivatives 44,467 29,321 Impairment of equity method investments -
(2,255) Impairment of available-for-sale securities - (5,570) Total
other expense (8,665) (1,527) Loss before income taxes and minority
interest (26,637) (6,068) Income tax (provision) benefit Current
1,687 (3,172) Deferred 42,476 - Income (loss) before minority
interest 17,526 (9,240) Minority interest 2,454 5,647 Net income
(loss) euro 19,980 euro (3,593) Income (loss) per share Basic euro
1.15 euro (0.21) Diluted euro 0.89 euro (0.21) Weighted average
number of shares outstanding Basic 17,426,351 16,940,858 Diluted
28,525,351 16,940,858 MERCER INTERNATIONAL INC. BUSINESS SEGMENT
INFORMATION For the Year Ended December 31, 2004 and 2003 (Euros in
thousands) Corporate, Rosenthal Stendal Total Other and
Consolidated Pulp Pulp Pulp Paper Eliminations Total Year Ended
December 31, 2004 Sales to external customers 137,287 41,225
178,512 54,591 - 233,103 Transportation and other 11,360 2,851
14,211 818 (234) 14,795 Intersegment net sales 1,949 885 2,834 -
(2,834) - 150,596 44,961 195,557 55,409 (3,068) 247,898 Operating
costs 106,557 47,988 154,545 51,444 (3,031) 202,958 Operating
depreciation and amortization 17,751 9,022 26,773 2,356 15 29,144
General and administrative 10,733 8,560 19,293 4,711 3,095 27,099
Impairment of capital assets - - - 6,000 - 6,000 Flooding grants,
less losses and expenses - - - 669 - 669 135,041 65,570 200,611
65,180 79 265,870 Income (loss) from operations 15,555 (20,609)
(5,054) (9,771) (3,147) (17,972) Interest expense (8,562) (12,190)
(20,752) (564) (2,433) (23,749) Unrealized loss on interest rate
derivatives (11) (32,320) (32,331) - - (32,331) Realized gain on
foreign exchange derivatives 13,253 31,214 44,467 - - 44,467 Other
income (expense) 3,067 (414) 2,653 176 119 2,948 Income (loss)
before income taxes and minority interest 23,302 (34,319) (11,017)
(10,159) (5,461) (26,637) Year Ended December 31, 2003 Sales to
external customers 126,594 - 126,594 55,862 - 182,456
Transportation and other 10,623 251 10,874 1,226 - 12,100
Intersegment net sales 2,335 - 2,335 - (2,335) - 139,552 251
139,803 57,088 (2,335) 194,556 Operating costs 107,409 - 107,409
50,709 (2,335) 155,783 Operating depreciation and amortization
21,881 - 21,881 2,026 - 23,907 General and administrative 8,332
3,641 11,973 5,168 2,182 19,323 Settlement expenses - - - - 1,041
1,041 Flooding grants, less losses and expenses - - - (957) - (957)
137,622 3,641 141,263 56,946 888 199,097 Income (loss) from
operations 1,930 (3,390) (1,460) 142 (3,223) (4,541) Interest
expense (8,445) (321) (8,766) (502) (2,255) (11,523) Realized and
unrealized loss on interest rate derivatives (111) (13,042)
(13,153) - - (13,153) Realized gain on foreign exchange derivatives
28,578 743 29,321 - - 29,321 Impairment of investments (4,480) -
(4,480) (1,090) (2,255) (7,825) Other income (expense) 1,431
(3,307) (1,876) 44 3,485 1,653 Income (loss) before income taxes
and minority interest 18,903 (19,317) (414) (1,406) (4,248) (6,068)
MERCER INTERNATIONAL INC. COMPUTATION OF OPERATING EBITDA For the
Quarter and Year Ended December 31, 2004 and 2003 (Euros in
thousands, except per share data) For the Quarter Ended For the
Quarter Ended December 31, 2004 December 31, 2003 (unaudited) Net
income euro 32,584 euro 5,580 Minority interest 1,482 2,852 Income
taxes (benefit) (44,126) 2,946 Interest expense 14,195 4,636
Investment income (1,269) (598) Derivative financial instruments
(13,213) (19,772) Other - 2,275 Impairment of investments - 59 Loss
from operations (10,347) (2,022) Add: Depreciation and amortization
11,927 5,970 Impairment charge - - Operating EBITDA(1) euro 1,580
euro 3,948 For the Quarter Ended For the Quarter Ended December 31,
2004 December 31, 2003 (unaudited) Net income (loss) euro 19,980
euro (3,593) Minority interest (2,454) (5,647) Income taxes
(benefit) (44,163) 3,172 Interest expense 23,749 11,523 Investment
income (2,948) (1,653) Derivative financial instruments (12,136)
(16,168) Other - 2,255 Impairment of investments - 5,570 Loss from
operations (17,972) (4,541) Add: Depreciation and amortization
29,144 24,105 Impairment charge 6,000 - Operating EBITDA euro
17,172 euro 19,564 (1) Operating EBITDA does not reflect the impact
of a number of items that affect the Company's net income (loss),
including financing costs and the effect of derivative instruments.
Operating EBITDA is not a measure of financial performance under
accounting principles generally accepted in the United States, and
should not be considered as an alternative to net income (loss) or
income (loss) from operations as a measure of performance, nor as
an alternative to net cash from operating activities as a measure
of liquidity. Operating EBITDA has significant limitations as an
analytical tool, and should not be considered in isolation, or as a
substitute for analysis of the Company's results as reported under
GAAP. MERCER INTERNATIONAL INC. COMPANY SALES BY PRODUCT CLASS AND
VOLUME (Unaudited) Quarter Ended December 31, 2004 2003 (Euros in
thousands) Sales by Product Class Pulp(1) euro 74,769 euro 34,176
Specialty Papers 9,458 9,897 Printing Papers 3,792 3,448 Total(1)
euro 88,019 euro 47,521 (Amount in tonnes) Sales by Volume Pulp(1)
192,254 81,729 Specialty Papers 9,381 10,201 Printing Papers 5,400
4,829 Total(1) 207,035 96,759 (1) Excluding intercompany sales of
2,859 and 361 tonnes of pulp and intercompany net sales revenues of
approximately euro 1.0 and euro 0.1 million in the three months
ended December 31, 2004 and 2003, respectively. NOTE: One tonne =
1.0160 of one ton. COMPANY SALES BY PRODUCT CLASS AND VOLUME Year
Ended December 31, 2004 2003 (Euros in thousands) Sales by Product
Class Pulp(1) euro 178,512 euro 126,594 Specialty Papers 37,497
40,082 Printing Papers 17,094 15,780 Total(1) euro 233,103 euro
182,456 (Amount in tonnes) Sales by Volume Pulp(1) 421,716 303,655
Specialty Papers 37,525 40,621 Printing Papers 24,757 21,397
Total(1) 483,998 365,673 (1) Excluding intercompany sales of 6,756
and 5,527 tonnes of pulp and intercompany net sales revenues of
approximately euro 2.8 and euro 2.3 million in the years ended
December 31, 2004 and 2003, respectively. (2) Not including Germany
or Italy; includes new entrant countries to the European Union from
their time of admission. NOTE: One tonne = 1.0160 of one ton. David
M. Gandossi Executive Vice-President & Chief Financial Officer
(604) 684-1099 Financial Dynamics Investors: Eric Boyriven Media:
Scot Hoffman (212) 850-5600 DATASOURCE: Mercer International Inc.
CONTACT: David M. Gandossi, Executive Vice-President & Chief
Financial Officer of Mercer International Inc., +1-604-684-1099;
Investors - Eric Boyriven, Media - Scot Hoffman, both of Financial
Dynamics, +1-212-850-5600, for Mercer International Inc. Web site:
http://www.mercerinternational.com/
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