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Mercer International Inc. Reports 2013 First Quarter Results

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NEW YORK, May 2, 2013 (GLOBE NEWSWIRE) -- Mercer International Inc. (Nasdaq:MERC) (TSX:MRI.U) today reported results for the first quarter ended March 31, 2013. Operating EBITDA* in the first quarter of 2013 was €24.3 million ($32.1 million), compared to €30.6 million ($40.1 million) in the first quarter of 2012 and €21.3 million ($27.6 million) in the fourth quarter of 2012.

For the first quarter of 2013, we had a net loss of €0.4 million ($0.5 million), or €0.01 ($0.01) per share, compared to net income of €1.2 million ($1.6 million), or €0.02 ($0.03) per share, in the first quarter of 2012 and a net loss of €5.2 million ($6.7 million), or €0.09 ($0.12) per share, for the fourth quarter of 2012.

Summary Financial Highlights

Q1
2013
Q4
2012
Q1
2012
(in millions, except per share amounts)
Pulp revenues € 180.1 € 171.3 € 199.4
Energy and chemical revenues 18.2 17.2 18.9
Operating income 9.5 7.3 16.2
Operating EBITDA 24.3 21.3 30.6
Gain on derivative instruments 4.8 2.4 0.9
Income tax benefit (provision) (0.9) (2.4) (0.7)
Net income (loss) (1) (0.4) (5.2) 1.2
Net income (loss) per share(1)(2) € (0.01) € (0.09) € 0.02
Common shares outstanding at period end 55.8 55.8 55.8
_________________________
(1) Attributable to common shareholders.
(2) Per basic and diluted share.

Summary Operating Highlights

Q1
2013
Q4
2012
Q1
2012
Pulp Production ('000 ADMTs) 361.2 349.5 380.3
Scheduled Production Downtime ('000 ADMTs) -- 18.1 --
Pulp Sales ('000 ADMTs) 356.7 335.2 384.8
Average NBSK pulp list price in Europe ($/ADMT)(1) 832 803 837
Average NBSK pulp list price in Europe (€/ADMT) 630 619 638
Average pulp sales realizations (€/ADMT)(2) 499 504 512
Energy Production ('000 MWh) 424.4 405.9 436.2
Energy Sales ('000 MWh) 173.6 163.8 182.4
_________________________
(1) Source: RISI pricing report.
(2) Sales realizations after discounts. Incorporates the effect of pulp price variations occurring between the order and shipment dates.
___________________________
* 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.
Q1
2013
Q4
2012
Q1
2012
Average Spot Currency Exchange Rates:
€ / $(1) 0.7580 0.7707 0.7623
C$ / $(1) 1.0087 0.9912 1.0009
C$ / €(2) 1.3319 1.2862 1.3129
_________________________
(1) Average Federal Reserve Bank of New York noon spot rate over the reporting period.
(2) Average Bank of Canada noon spot rate over the reporting period.

President's Comments

Mr. Jimmy S.H. Lee, President and Chairman, stated: "Despite a continued weak NBSK pulp price environment, we achieved Operating EBITDA of €24.3 million in the current quarter, primarily as a result of strong sales volumes and energy and chemical sales at our mills. Overall, pulp sales volumes increased by approximately 6% to 356,660 ADMTs during the first quarter of 2013 from 335,215 ADMTs in the prior quarter. Energy and chemical revenues also increased by approximately 6% to €18.2 million in the current quarter compared to the prior quarter. A weakening of the U.S. dollar by 1% compared to the first quarter of 2012 negatively impacted our operating results."

Mr. Lee continued: "Pulp prices marginally increased in the first quarter of 2013. However, we believe that overall prices are still low given current projected supply and demand levels. At the end of the first quarter of 2013, list prices in Europe were approximately $840 per ADMT and in North America and China were approximately $900 and $700 per ADMT, respectively."

Mr. Lee continued: "Project Blue Mill at our Stendal mill, which is designed to increase our Stendal mill's annual energy production by 109,000 MWh and annual pulp production by 30,000 ADMTs, remains on schedule and budget and is currently expected to start to generate power sales in or about the end of September 2013."

Mr. Lee added: "Our average overall fiber costs were slightly higher than the previous quarter. Fiber costs at our German mills were up during the first quarter of 2013 due to increased demand from the European pellet and board producers, reduced wood supply because of longer than normal winter weather conditions and lower availability of trucking transportation. Fiber costs at our Celgar mill decreased as a result of increased sawmill activity in the region. The recent extreme weather conditions are expected to put upward pressure on fiber costs at our German mills in the short term, whereas we expect fiber costs at our Celgar mill to continue to decrease in the short term."

Mr. Lee concluded: "We currently expect strong demand from China as purchasers re-stock inventories which, along with annual maintenance shuts by producers, should cause NBSK pulp prices to continue to gradually increase in the medium term."

Three Months Ended March 31, 2013 Compared to Three Months Ended March 31, 2012

Total revenues for the three months ended March 31, 2013 decreased by approximately 9% to €198.3 million ($261.8 million) from €218.4 million ($286.4 million) in the same period in 2012, due to lower pulp revenues and energy and chemical revenues. Pulp revenues for the three months ended March 31, 2013 decreased to €180.1 million from €199.4 million in the comparative period of 2012, primarily due to the combined effect of lower pulp sales volumes and average pulp sales realizations and a weaker U.S. dollar relative to the Euro.

Energy and chemical revenues decreased by approximately 4% in the first quarter to €18.2 million from €18.9 million in the same quarter last year, primarily as a result of lower pulp production at our Celgar mill.

Pulp production decreased by approximately 5% to 361,164 ADMTs in the current quarter from 380,342 ADMTs in the same quarter of 2012, primarily due to decreased pulp production at our Celgar and Stendal mills. We have 11 days (approximately 16,000 ADMTs) of maintenance downtime scheduled for our Celgar mill in the second quarter of 2013 in order to perform annual maintenance.

Pulp sales volume decreased by approximately 7% to 356,660 ADMTs in the current quarter from 384,826 ADMTs in the comparative period of 2012, primarily due to lower sales to China and the United States. Average pulp sales realizations decreased by approximately 3% to €499 per ADMT in the first quarter of 2013, compared to €512 per ADMT in the same period last year, due to lower pulp prices and a weaker U.S. dollar.

Costs and expenses in the first quarter of 2013 decreased by 7% to €188.7 million from €202.1 million in the comparative period of 2012, primarily due to lower pulp sales volumes and fiber costs, partially offset by higher natural gas costs at our German mills resulting from higher usage and prices.

On average, our overall per unit fiber costs in the current quarter decreased by approximately 2% from the same period in 2012.

Selling, general and administrative expenses decreased to €8.9 million in the first quarter of 2013 from €10.1 million in the first quarter of 2012.

For the first quarter of 2013, operating income decreased to €9.5 million from €16.2 million in the comparative quarter of 2012, primarily due to the combined effect of lower pulp prices and sales volumes.

Interest expense in the first quarter of 2013 decreased to €13.1 million from €14.1 million in the comparative quarter of 2012, primarily due to lower debt levels associated with the Stendal mill in the first quarter of 2013.

We recorded a net derivative gain of €4.8 million, which includes a €0.3 million loss related to fixed price pulp swap contracts entered into in the fourth quarter of 2012 and an unrealized gain of approximately €5.1 million on the mark to market adjustment of our Stendal mill's interest rate derivative, compared to an unrealized derivative gain of €0.9 million in the same quarter of last year.

The noncontrolling shareholder's interest in each of the first quarters of 2013 and 2012 was €0.7 million.

In the first quarter of 2013, Operating EBITDA decreased to €24.3 million from €30.6 million in the first quarter of 2012. 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 a net loss attributable to common shareholders of €0.4 million, or €0.01 per basic and diluted share, for the first quarter of 2013, which included a net non-cash unrealized gain of €4.7 million on the fixed price pulp swaps and Stendal interest rate derivative, partially offset by a non-cash charge for stock compensation of €0.3 million. In the first quarter of 2012, we reported net income attributable to common shareholders of €1.2 million, or €0.02 per basic and diluted share, 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 compensation of €0.9 million.

Liquidity and Capital Resources

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

As at March 31,
2013
As at December 31,
2012
(in thousands)
Financial Position
Cash and cash equivalents € 110,664 € 104,239
Working capital 202,331 208,573
Total assets 1,185,560 1,183,603
Long-term liabilities 756,192 768,253
Total equity 275,824 278,925

As at March 31, 2013, we had approximately €26.2 million and C$22.3 million available under our Rosenthal and Celgar facilities, respectively. As at March 31, 2013, approximately €432.9 million was outstanding under our Stendal mill's loan facility, compared to €467.9 million as at March 31, 2012.

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,
2013
As at December 31,
2012
(in thousands)
Financial Position
Cash and cash equivalents € 52,032 € 36,714
Working capital 135,744 132,130
Total assets 661,657 644,119
Long-term liabilities 266,151 260,185
Total equity 330,177 335,353

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 3, 2013 at 10:00 AM (Eastern Daylight Time). Listeners can access the conference call live and archived through June 2, 2013, over the Internet at http://investor.shareholder.com/media/eventdetail.cfm?eventid=128464&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.

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.

-FINANCIAL TABLES FOLLOW-

MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In thousands of Euros)
March 31,
2013
December 31,
2012
ASSETS
Current assets
Cash and cash equivalents € 110,664 € 104,239
Receivables 120,184 110,087
Inventories 112,908 118,300
Prepaid expenses and other 8,295 7,907
Deferred income tax 3,824 4,465
Total current assets € 355,875 € 344,998
Long-term assets
Property, plant and equipment 802,959 808,878
Deferred note issuance and other 11,622 12,162
Deferred income tax 15,104 17,565
829,685 838,605
Total assets € 1,185,560 € 1,183,603
LIABILITIES
Current liabilities
Accounts payable and other € 97,645 € 89,950
Pension and other post-retirement benefit obligations 818 813
Debt 55,081 45,662
Total current liabilities 153,544 136,425
Long-term liabilities
Debt 658,166 665,741
Unrealized interest rate derivative losses 45,513 50,678
Pension and other post-retirement benefit obligations 32,451 32,141
Capital leases and other 13,887 13,936
Deferred income tax 6,175 5,757
756,192 768,253
Total liabilities 909,736 904,678
EQUITY
Shareholders' equity
Share capital 248,757 248,371
Paid-in capital (3,706) (3,547)
Retained earnings 25,375 25,800
Accumulated other comprehensive income 21,570 25,181
Total shareholders' equity 291,996 295,805
Noncontrolling interest (deficit) (16,172) (16,880)
Total equity 275,824 278,925
Total liabilities and equity € 1,185,560 € 1,183,603
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands of Euros, except per share data)
Three Months Ended
March 31,
2013 2012
Revenues
Pulp € 180,120 € 199,439
Energy and chemicals 18,152 18,919
198,272 218,358
Costs and expenses
Operating costs 165,098 177,770
Operating depreciation and amortization 14,731 14,287
18,443 26,301
Selling, general and administrative expenses 8,895 10,058
Operating income 9,548 16,243
Other income (expense)
Interest expense (13,148) (14,133)
Gain on derivative instruments 4,820 876
Other income (expense) (70) (410)
Total other income (expense) (8,398) (13,667)
Income before income taxes 1,150 2,576
Income tax benefit (provision)
Current 3,271 (56)
Deferred (4,138) (676)
Net income 283 1,844
Less: net income attributable to noncontrolling interest (708) (671)
Net income (loss) attributable to common shareholders € (425) € 1,173
Net income (loss) per share attributable to common shareholders
Basic and diluted € (0.01) € 0.02
MERCER INTERNATIONAL INC.
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands of Euros)
Three Months Ended
March 31,
2013 2012
Cash flows from (used in) operating activities
Net income € 283 € 1,844
Adjustments to reconcile net income to cash flows from operating activities
Unrealized gain on derivative instruments (4,695) (876)
Depreciation and amortization 14,794 14,350
Deferred income taxes 4,138 676
Stock compensation expense 267 868
Pension and other post-retirement expense, net of funding 121 (14)
Other 1,183 793
Changes in working capital
Receivables (9,704) 2,685
Inventories 5,746 11,738
Accounts payable and accrued expenses 10,597 2,649
Other (782) 1,424
Net cash from (used in) operating activities 21,948 36,137
Cash flows from (used in) investing activities
Purchase of property, plant and equipment (11,395) (8,465)
Proceeds on sale of property, plant and equipment 13 226
Net cash from (used in) investing activities (11,382) (8,239)
Cash flows from (used in) financing activities
Repayment of debt (20,545) (10,126)
Proceeds from borrowings of debt 10,000 --
Repayment of capital lease obligations (700) (611)
Proceeds from credit facilities, net 5,968 3,759
Payment of note issuance costs -- (1,621)
Proceeds from government grants 730 630
Net cash from (used in) financing activities (4,547) (7,969)
Effect of exchange rate changes on cash and cash equivalents 406 (805)
Net increase in cash and cash equivalents 6,425 19,124
Cash and cash equivalents, beginning of period 104,239 105,072
Cash and cash equivalents, end of period € 110,664 € 124,196
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 Notes require that we provide the results of operations and financial condition of Mercer International Inc. and our restricted subsidiaries under the indenture, collectively referred to as the "Restricted Group". As at and during the three months ended March 31, 2013 and 2012, 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, 2013
Restricted
Group
Unrestricted
Subsidiaries
Eliminations Consolidated
Group
ASSETS
Current assets
Cash and cash equivalents € 52,032 € 58,632 € -- € 110,664
Receivables 69,944 50,240 -- 120,184
Inventories 72,073 40,835 -- 112,908
Prepaid expenses and other 4,834 3,461 -- 8,295
Deferred income tax 2,190 1,634 -- 3,824
Total current assets 201,073 154,802 -- 355,875
Long-term assets
Property, plant and equipment 340,459 462,500 -- 802,959
Deferred note issuance and other 6,322 5,300 -- 11,622
Deferred income tax 9,222 5,882 -- 15,104
Due from unrestricted group 104,581 -- (104,581) --
Total assets € 661,657 € 628,484 € (104,581) € 1,185,560
LIABILITIES
Current liabilities
Accounts payable and other € 52,688 € 44,957 € -- € 97,645
Pension and other post-retirement benefit obligations 818 -- -- 818
Debt 11,823 43,258 -- 55,081
Total current liabilities 65,329 88,215 -- 153,544
Long-term liabilities
Debt 221,430 436,736 -- 658,166
Due to restricted group -- 104,581 (104,581) --
Unrealized interest rate derivative losses -- 45,513 -- 45,513
Pension and other post-retirement benefit obligations 32,451 -- -- 32,451
Capital leases and other 6,095 7,792 -- 13,887
Deferred income tax 6,175 -- -- 6,175
Total liabilities 331,480 682,837 (104,581) 909,736
EQUITY
Total shareholders' equity (deficit) 330,177 (38,181) -- 291,996
Noncontrolling interest (deficit) -- (16,172) -- (16,172)
Total liabilities and equity € 661,657 € 628,484 € (104,581) € 1,185,560
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Balance Sheets
(Unaudited)
(In thousands of Euros)
December 31, 2012
Restricted
Group
Unrestricted
Subsidiaries
Eliminations Consolidated
Group
ASSETS
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 interest (deficit) -- (16,880) -- (16,880)
Total liabilities and equity € 644,119 € 641,795 € (102,311) € 1,183,603
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Operations
(Unaudited)
(In thousands of Euros)
Three months ended March 31, 2013
Restricted
Group
Unrestricted
Subsidiaries
Eliminations Consolidated
Group
Revenues
Pulp € 100,240 € 79,880 € -- € 180,120
Energy and chemicals 7,090 11,062 -- 18,152
107,330 90,942 -- 198,272
Operating costs 89,523 75,575 -- 165,098
Operating depreciation and amortization 8,191 6,540 -- 14,731
Selling, general and administrative expenses 5,716 3,179 -- 8,895
103,430 85,294 -- 188,724
Operating income 3,900 5,648 -- 9,548
Other income (expense)
Interest expense (5,866) (8,930) 1,648 (13,148)
Gain (loss) on derivative instruments (345) 5,165 -- 4,820
Other income (expense) 1,535 43 (1,648) (70)
Total other income (expense) (4,676) (3,722) -- (8,398)
Income (loss) before income taxes (776) 1,926 -- 1,150
Income tax benefit (provision) (1,016) 149 -- (867)
Net income (loss) (1,792) 2,075 -- 283
Less: net income attributable to noncontrolling interest -- (708) -- (708)
Net income (loss) attributable to common shareholders € (1,792) € 1,367 € -- € (425)
Three months ended March 31, 2012
Restricted
Group
Unrestricted
Subsidiaries
Eliminations Consolidated
Group
Revenues
Pulp € 109,889 € 89,550 € -- € 199,439
Energy and chemicals 7,991 10,928 -- 18,919
117,880 100,478 -- 218,358
Operating costs 98,336 79,434 -- 177,770
Operating depreciation and amortization 7,640 6,647 -- 14,287
Selling, general and administrative expenses 6,521 3,537 -- 10,058
112,497 89,618 -- 202,115
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 benefit (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
MERCER INTERNATIONAL INC.
RESTRICTED GROUP SUPPLEMENTAL DISCLOSURE
Combined Condensed Statements of Cash Flows
(Unaudited)
(In thousands of Euros)
Three months ended March 31, 2013
Restricted
Group
Unrestricted
Subsidiaries
Consolidated
Group
Cash flows from (used in) operating activities
Net income (loss) € (1,792) € 2,075 € 283
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized loss (gain) on derivative instruments 470 (5,165) (4,695)
Depreciation and amortization 8,254 6,540 14,794
Deferred income taxes 991 3,147 4,138
Stock compensation expense 267 -- 267
Pension and other post-retirement expense, net of funding 121 -- 121
Other 413 770 1,183
Changes in working capital
Receivables (8,339) (1,365) (9,704)
Inventories 3,067 2,679 5,746
Accounts payable and accrued expenses 10,505 92 10,597
Other(1) (1,714) 932 (782)
Net cash from (used in) operating activities 12,243 9,705 21,948
Cash flows from (used in) investing activities
Purchase of property, plant and equipment (2,645) (8,750) (11,395)
Proceeds on sale of property, plant and equipment 13 -- 13
Net cash from (used in) investing activities (2,632) (8,750) (11,382)
Cash flows from (used in) financing activities
Repayment of debt (545) (20,000) (20,545)
Proceeds from borrowings of debt -- 10,000 10,000
Repayment of capital lease obligations (122) (578) (700)
Proceeds from credit facilities, net 5,968 -- 5,968
Proceeds from government grants -- 730 730
Net cash from (used in) financing activities 5,301 (9,848) (4,547)
Effect of exchange rate changes on cash and cash equivalents 406 -- 406
Net increase (decrease) in cash and cash equivalents 15,318 (8,893) 6,425
Cash and cash equivalents, beginning of period 36,714 67,525 104,239
Cash and cash equivalents, end of period € 52,032 € 58,632 € 110,664
______________________
(1) Includes intercompany related transactions.
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
Subsidiaries
Consolidated
Group
Cash flows from (used in) operating activities
Net income (loss) € (317) € 2,161 € 1,844
Adjustments to reconcile net income (loss) to cash flows from operating activities
Unrealized gain on derivative instruments -- (876) (876)
Depreciation and amortization 7,703 6,647 14,350
Deferred income taxes 676 -- 676
Stock compensation expense 868 -- 868
Pension and other post-retirement expense, net of funding (14) -- (14)
Other 58 735 793
Changes in working capital
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 (used in) 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 from (used in) investing activities (4,032) (4,207) (8,239)
Cash flows from (used in) financing activities
Repayment of 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 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
March 31,
2013 2012
(in thousands)
Net income (loss) attributable to common shareholders € (425) € 1,173
Net income attributable to noncontrolling interest 708 671
Income tax provision (benefit) 867 732
Interest expense 13,148 14,133
Gain on derivative instruments (4,820) (876)
Other expense (income) 70 410
Operating income 9,548 16,243
Add: Depreciation and amortization 14,794 14,350
Operating EBITDA € 24,342 € 30,593
Three Months Ended
March 31,
2013 2012
(in thousands)
Restricted Group(1)
Net loss € (1,792) € (317)
Income tax provision (benefit) 1,016 715
Interest expense 5,866 5,810
Loss on derivative instruments 345 --
Other expense (income) (1,535) (825)
Operating income 3,900 5,383
Add: Depreciation and amortization 8,254 7,703
Operating EBITDA € 12,154 € 13,086
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(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 & President (604) 684-1099 David M. Gandossi Executive Vice-President & Chief Financial Officer (604) 684-1099

Source:Mercer International Inc.