MERCER INTERNATIONAL INC. - Quarter Report: 2011 September (Form 10-Q)

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No.: 000-51826

MERCER INTERNATIONAL INC.

(Exact name of Registrant as specified in its charter)

Washington		47-0956945
(State or other jurisdiction		(I.R.S. Employer
of incorporation or organization)		Identification No.)

Suite 1120, 700 West Pender Street, Vancouver, British Columbia, Canada, V6C 1G8
(Address of office)

(604) 684-1099
(Registrant’s telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES þ NO o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months or for such shorter period that the registrant was required to submit and post such files). YES þ NO o

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer o		Accelerated Filer þ		Non-Accelerated Filer o		Smaller Reporting Company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES o NO þ

The Registrant had 55,779,204 shares of common stock outstanding as at November 4, 2011.

 

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011

(Unaudited)

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED BALANCE SHEETS

(Unaudited)
(In thousands of Euros)

		September 30,				December 31,
		2011				2010
ASSETS
Current assets
Cash and cash equivalents		€	127,758			€	99,022
Marketable securities (Note 4)			4,013				—
Receivables			110,296				121,709
Inventories (Note 5)			128,041				102,219
Prepaid expenses and other			9,907				11,360
Deferred income tax			24,951				22,570
Total current assets			404,966				356,880
Long-term assets
Property, plant and equipment			815,727				846,767
Deferred note issuance and other			9,943				11,082
Note receivable			—				1,346
			825,670				859,195
Total assets		€	1,230,636			€	1,216,075
LIABILITIES
Current liabilities
Accounts payable and accrued expenses		€	109,845			€	84,873
Pension and other post-retirement benefit obligations (Note 8)			694				728
Debt (Note 6)			25,671				39,596
Total current liabilities			136,210				125,197
Long-term liabilities
Debt (Note 6)			707,040				782,328
Unrealized interest rate derivative losses (Notes 7 and 10)			51,553				50,973
Pension and other post-retirement benefit obligations (Note 8)			23,010				24,236
Capital leases and other			11,857				12,010
Deferred income tax			14,413				7,768
			807,873				877,315
Total liabilities		€	944,083			€	1,002,512
EQUITY
Shareholders’ equity
Share capital (Note 9)			247,642				219,211
Paid-in capital			(5,308	)			(3,899	)
Retained earnings (deficit)			39,786				(10,956	)
Accumulated other comprehensive income (loss)			21,762				31,712
Total shareholders’ equity			303,882				236,068
Noncontrolling interest (deficit)			(17,329	)			(22,505	)
Total equity			286,553				213,563
Total liabilities and equity		€	1,230,636			€	1,216,075

Commitments and contingencies (Note 11)
Subsequent event (Note 12)

The accompanying notes are an integral part of these interim consolidated financial statements.

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)
(In thousands of Euros, except per share data)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Revenues
Pulp		€	190,426			€	224,697			€	618,158			€	624,111
Energy			14,352				9,721				41,970				30,783
			204,778				234,418				660,128				654,894
Costs and expenses
Operating costs			146,885				162,293				482,775				470,977
Operating depreciation and amortization			13,832				13,987				41,777				41,817
			44,061				58,138				135,576				142,100
Selling, general and administrative expenses			8,754				6,894				27,616				24,944
Purchase (sale) of emission allowances			—				(167	)			(202	)			(167	)
Operating income (loss)			35,307				51,411				108,162				117,323
Other income (expense)
Interest expense			(14,117	)			(17,820	)			(44,906	)			(51,141	)
Investment income (loss)			270				93				733				304
Foreign exchange gain (loss) on debt			(181	)			9,927				1,272				(4,675	)
Gain (loss) on extinguishment of debt (Note 6)			(69	)			—				(69	)			(929	)
Gain (loss) on derivative instruments (Note 7)			(10,484	)			485				(580	)			(10,523	)
Total other income (expense)			(24,581	)			(7,315	)			(43,550	)			(66,964	)
Income (loss) before income taxes			10,726				44,096				64,612				50,359
Income tax benefit (provision) — current			(1,557	)			(2,227	)			(3,854	)			(3,750	)
— deferred			(1,567	)			9,382				(3,707	)			9,382
Net income (loss)			7,602				51,251				57,051				55,991
Less: net loss (income) attributable to noncontrolling interest			838				(5,116	)			(5,175	)			(5,001	)
Net income (loss) attributable to common shareholders		€	8,440			€	46,135			€	51,876			€	50,990
Net income (loss) per share attributable to common shareholders (Note 3)
Basic		€	0.15			€	1.17			€	1.07			€	1.36
Diluted		€	0.15			€	0.82			€	0.92			€	0.93

The accompanying notes are an integral part of these interim consolidated financial statements.

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)

(Unaudited)
(In thousands of Euros)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Net income (loss) attributable to common shareholders		€	8,440			€	46,135			€	51,876			€	50,990
Retained earnings (deficit), beginning of period			32,480				(92,380	)			(10,956	)			(97,235	)
			40,920				(46,245	)			40,920				(46,245	)
Retirement of treasury shares			(1,134	)			—				(1,134	)			—
Retained earnings (deficit), end of period		€	39,786			€	(46,245	)		€	39,786			€	(46,245	)

INTERIM CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)
(In thousands of Euros)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Net income (loss)		€	7,602			€	51,251			€	57,051			€	55,991
Other comprehensive income (loss), net of taxes
Foreign currency translation adjustment			(12,913	)			(134	)			(10,313	)			2,809
Pension income (expense)			(20	)			317				383				(282	)
Unrealized gains (losses) on securities arising during the period			(20	)			(29	)			(20	)			(11	)
Other comprehensive income (loss), net of taxes			(12,953	)			154				(9,950	)			2,516
Total comprehensive income (loss)			(5,351	)			51,405				47,101				58,507
Comprehensive loss (income) attributable to noncontrolling interest			838				(5,116	)			(5,175	)			(5,001	)
Comprehensive income (loss) attributable to common shareholders		€	(4,513	)		€	46,289			€	41,926			€	53,506

The accompanying notes are an integral part of these interim consolidated financial statements.

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)
(In thousands of Euros)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Cash flows from (used in) operating activities
Net income (loss) attributable to common shareholders		€	8,440			€	46,135			€	51,876			€	50,990
Adjustments to reconcile net income (loss) attributable to common shareholders to cash flows from operating activities
Loss (gain) on derivative instruments			10,484				(485	)			580				10,523
Foreign exchange loss (gain) on debt			181				(9,927	)			(1,272	)			4,675
Loss (gain) on extinguishment of debt			69				—				69				929
Depreciation and amortization			13,893				14,055				41,960				42,052
Accretion expense (income)			(168	)			1,111				591				2,056
Noncontrolling interest			(838	)			5,116				5,175				5,001
Deferred income taxes			1,567				(9,382	)			3,707				(9,382	)
Stock compensation expense			305				540				2,844				1,273
Pension and other post-retirement expense, net of funding			(95	)			96				(102	)			428
Other			359				989				1,962				2,836
Changes in current assets and liabilities
Receivables			(9,452	)			19,591				3,248				(26,351	)
Inventories			(23,776	)			(26,005	)			(27,862	)			(36,988	)
Accounts payable and accrued expenses			318				1,814				24,873				15,146
Other			(752	)			(4,883	)			92				(5,477	)
Net cash from (used in) operating activities			535				38,765				107,741				57,711
Cash flows from (used in) investing activities
Purchase of property, plant and equipment			(10,297	)			(8,484	)			(26,122	)			(28,876	)
Proceeds on sale of property, plant and equipment			1,564				28				1,944				577
Note receivable			2,064				216				2,835				711
Purchase of marketable securities			(4,018	)			—				(4,018	)			—
Net cash from (used in) investing activities			(10,687	)			(8,240	)			(25,361	)			(27,588	)
Cash flows from (used in) financing activities
Repayment of notes payable and debt			(12,160	)			(6,211	)			(42,511	)			(14,461	)
Repayment of capital lease obligations			(776	)			(638	)			(2,269	)			(2,245	)
Proceeds from borrowings of notes payable and debt			—				—				—				840
Proceeds from (repayment of) credit facilities, net			—				(4,057	)			(14,652	)			1,493
Proceeds from government grants			4,470				6,778				13,419				17,337
Purchase of treasury shares			(7,477	)			—				(7,477	)			—
Net cash from (used in) financing activities			(15,943	)			(4,128	)			(53,490	)			2,964
Effect of exchange rate changes on cash and cash equivalents			2,058				(3,416	)			(154	)			748
Net increase (decrease) in cash and cash equivalents			(24,037	)			22,981				28,736				33,835
Cash and cash equivalents, beginning of period			151,795				62,145				99,022				51,291
Cash and cash equivalents, end of period		€	127,758			€	85,126			€	127,758			€	85,126

The accompanying notes are an integral part of these interim consolidated financial statements.

MERCER INTERNATIONAL INC.

INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(Unaudited)
(In thousands of Euros)

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Supplemental disclosure of cash flow information
Cash paid during the period for
Interest		€	5,822			€	17,402			€	35,742			€	46,435
Income taxes			1,389				412				1,725				441
Supplemental schedule of non-cash investing and financing activities
Acquisition of production and other equipment under capital lease obligations		€	973			€	429			€	1,246			€	959
Decrease in accounts payable relating to investing activities			1,530				4,986				7,906				1,283

The accompanying notes are an integral part of these interim consolidated financial statements.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 1. The Company and Summary of Significant Accounting Policies

Basis of Presentation

The interim consolidated financial statements contained herein include the accounts of Mercer International Inc. (“Mercer Inc.”) and its wholly-owned and majority-owned subsidiaries (collectively the “Company”). Mercer Inc.’s common shares are quoted and listed for trading on both the NASDAQ Global Market and the Toronto Stock Exchange.

The interim consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). The year-end consolidated balance sheet data was derived from audited financial statements. The footnote disclosure included herein has been prepared in accordance with accounting principles generally accepted for interim financial statements in the United States (“GAAP”). The interim consolidated financial statements should be read together with the audited consolidated financial statements and accompanying notes included in the Company’s latest annual report on Form 10-K for the fiscal year ended December 31, 2010. In the opinion of the Company, the unaudited interim consolidated financial statements contained herein contain all adjustments necessary to fairly present the results of the interim periods included. The results for the periods included herein may not be indicative of the results for the entire year.

The Company has three pulp mills that are aggregated into one reportable business segment, market pulp. Accordingly, the results presented are those of the reportable business segment.

Certain prior year amounts in the interim consolidated financial statements have been reclassified to conform to the current year presentation.

In these interim consolidated financial statements, unless otherwise indicated, all amounts are expressed in Euros (“€”). The term “U.S. dollars” and the symbol “$” refer to United States dollars. The symbol “C$” refers to Canadian dollars.

Use of Estimates

Preparation of financial statements and related disclosures in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Significant management judgment is required in determining the accounting for, among other things, doubtful accounts and reserves, depreciation and amortization, future cash flows associated with impairment testing for long-lived assets, derivative financial instruments, environmental conservation and legal liabilities, asset retirement obligations, pensions and post-retirement benefit obligations, income taxes, contingencies, and inventory obsolescence and provisions. Actual results could differ from these estimates, and changes in these estimates are recorded when known.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 1. The Company and Summary of Significant Accounting Policies (continued)

Recent Accounting Pronouncements

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-04, Fair Value Measurements (“ASU 2011-04”), which expands the existing disclosure requirements for fair value measurements (particularly for Level 3 inputs) defined under Accounting Standards Codification No. 820, Fair Value Measurement (“ASC 820”), and makes other amendments. Many of the amendments to ASC 820 are being made to eliminate wording differences between GAAP and International Financial Reporting Standards and are not intended to result in a change in the application of the requirements of ASC 820. However, some of the amendments clarify the application of existing fair value measurement requirements and others change certain requirements for measuring fair value and could change how the fair value measurement guidance in ASC 820 is applied. The measurement and disclosure requirements of ASU 2011-04 are effective for reporting periods beginning after December 15, 2011 and are to be applied prospectively. The Company does not expect that the adoption of this new guidance will have a material impact on the consolidated financial statements or related note disclosures.

In June 2011, the FASB issued Accounting Standards Update 2011-05, Presentation of Comprehensive Income (“ASU 2011-05”), which revises the manner in which entities present comprehensive income in their financial statements. The new guidance amends Accounting Standards Codification No. 220, Comprehensive Income, and gives reporting entities the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income in either a continuous statement of comprehensive income or two separate but consecutive statements. Under the two-statement approach, which the Company currently uses, the first statement includes components of net income, and the second statement includes components of other comprehensive income. ASU 2011-05 does not change the items that must be reported in other comprehensive income. This new guidance is effective for reporting periods beginning after December 15, 2011 and is to be applied retrospectively. The Company does not expect the adoption of this guidance to have an impact on the consolidated financial statements or related note disclosures.

Note 2. Stock-Based Compensation

In June 2010, the Company adopted a new stock incentive plan (the “2010 Plan”) which provides for options, restricted stock rights, restricted shares, performance shares, performance share units and stock appreciation rights to be awarded to employees, consultants and non-employee directors. As at September 30, 2011, after factoring in all allocated shares, there remain approximately 1.1 million common shares available for grant pursuant to the 2010 Plan.

Performance Shares

Grants of performance shares comprise rights to receive shares at a future date that are contingent on the Company and the grantee achieving certain performance objectives.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 2. Stock-Based Compensation (continued)

In February 2011, the Company awarded a total of 812,573 performance shares to employees of the Company, the majority of which vest using a partial vesting schedule between 2014 and 2016; 50% are scheduled to vest on January 1, 2014, 25% are scheduled to vest on January 1, 2015, and the remaining 25% are scheduled to vest on January 1, 2016. There were nil performance shares which had vested, been forfeited, or been cancelled during the three and nine months ended September 30, 2011. Expense recognized for the three and nine month periods ended September 30, 2011 was €13 and €771, respectively. Performance shares are expensed each reporting period based on their fair value, which is then amortized to reflect the time elapsed in the vesting period. The fair value of the performance shares is determined based upon the targeted number of shares awarded and the quoted price of the Company’s shares at the reporting date. The target number of shares is determined using management’s best estimate. The final determination of the number of shares to be granted will be made by the Board of Directors.

Between February and March 2011, the Company granted and issued a total of 474,728 common shares under its performance share plan, which were originally awarded in 2008 and vested on December 31, 2010. Pursuant to the accounting guidance in FASB’s Accounting Standards Codification No. 718, Compensation — Stock Compensation, the Company adjusted the number of performance shares awarded to employees to the number granted by the Board of Directors, and accordingly adjusted compensation cost based on the fair value of Mercer’s common shares at the grant date. As a result, the Company recognized approximately €1,420 of stock compensation expense associated with the final determination of these performance shares in the three months ended March 31, 2011.

Restricted Shares

The fair value of restricted shares is determined based upon the number of shares granted and the quoted price of the Company’s shares on the date of grant. Restricted shares generally vest over a one year period, except as noted below. Expense is recognized on a straight-line basis over the vesting period.

During the three months ended June 30, 2011, 38,000 restricted shares were granted and issued to directors of the Company (2010 — 56,000). During the three months ended March 31, 2011, 200,000 (2010 — nil) restricted shares were granted and issued to the Chief Executive Officer of the Company, which vest in equal amounts over a five year period commencing in 2012.

During the three and nine months ended September 30, 2011, no restricted shares were cancelled or forfeited (2010 — nil and nil), and nil and 56,000 restricted shares had vested, respectively (2010 — 21,000 and 21,000). As at September 30, 2011, the total number of unvested restricted shares was 238,000 (2010 — 56,000).

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 2. Stock-Based Compensation (continued)

Expense recognized for the three and nine month periods ended September 30, 2011 was €295 and €691, respectively (2010 — €60 and €83). As at September 30, 2011, the total remaining unrecognized compensation cost related to restricted shares amounted to approximately €1,642 (2010 — €148), which will be amortized over the remaining vesting periods.

Stock Options

During the three and nine month periods ended September 30, 2011 and 2010, no options were granted, exercised or cancelled, and nil and 15,000 options expired, respectively (2010 — nil and 738,334). The aggregate intrinsic value of options outstanding and currently exercisable as at September 30, 2011 was $0.28 per option.

Stock compensation expense recognized for stock options for the three and nine month periods ended September 30, 2011 was €nil (2010 — €nil). All stock options have fully vested.

Note 3. Net Income (Loss) Per Share Attributable to Common Shareholders

		Three Months Ended								Nine Months Ended
		September 30,								September 30,
		2011				2010				2011				2010
Net income (loss) attributable to common shareholders — basic		€	8,440			€	46,135			€	51,876			€	50,990
Interest on convertible notes, net of tax			40				571				789				2,011
Net income (loss) attributable to common shareholders — diluted		€	8,480			€	46,706			€	52,665			€	53,001
Net income (loss) per share attributable to common shareholders
Basic		€	0.15			€	1.17			€	1.07			€	1.36
Diluted		€	0.15			€	0.82			€	0.92			€	0.93
Weighted average number of common shares outstanding:
Basic(1)			55,141,780				39,446,447				48,289,039				37,383,444
Effect of dilutive instruments:
Performance shares			158,023				455,609				543,383				453,780
Restricted shares			—				7,220				65,917				15,232
Stock options and awards			46,953				—				69,602				—
Convertible notes			1,219,468				17,113,010				8,260,848				19,167,690
Diluted			56,566,224				57,022,286				57,228,789				57,020,146

The calculation of diluted net income (loss) per share attributable to common shareholders does not assume the exercise of any instruments that would have an anti-dilutive effect on earnings per share.

Restricted shares excluded from the calculation of diluted income (loss) per share attributable to common shareholders because they are anti-dilutive represented 238,000 shares for the three month period ended September 30, 2011.

The diluted net income (loss) per share calculation for the three and nine month periods ended September 30, 2010 excluded 190,000 shares related to stock options, as the exercise price of these options was greater than their average market value, which would result in an anti-dilutive effect on diluted earnings per share.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 4. Marketable Securities

The Company’s marketable securities at September 30, 2011 and December 31, 2010 are summarized as follows:

						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
September 30, 2011		Cost				Gains				Losses				Value
Current
0.5% German federal government bonds due June 2012		€	2,008			€	—			€	(2	)		€	2,006
0.75% German federal government bonds due September 2012			2,010				—				(3	)			2,007
		€	4,018			€	—			€	(5	)		€	4,013
Long-term
Equity securities		€	63			€	130			€	(15	)		€	178

						Gross				Gross
		Amortized				Unrealized				Unrealized				Fair
December 31, 2010		Cost				Gains				Losses				Value
Long-term
Equity securities		€	63			€	213			€	(1	)		€	275

In order to maintain the Company’s liquidity requirements and manage risk while ensuring a reasonable return, the Company invests in low risk and highly liquid marketable securities that are classified as available-for-sale investments and accordingly carried at fair value.

The Company recognizes any gross unrealized gains or losses through the “Accumulated other comprehensive income (loss)” line, and records investments in long-term marketable securities within the “Deferred note issuance and other” line in the Interim Consolidated Balance Sheet.

As at September 30, 2011, the Company had invested in German federal government bonds, with contractual maturities of less than one year. These bonds are highly liquid and are considered low risk debt securities. The Company also had nominal amounts invested in equity securities.

The Company reviews for other-than-temporary losses on a regular basis and has considered the gross unrealized losses indicated above to be temporary in nature.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 5. Inventories

		September 30, 2011				December 31, 2010
Raw materials		€	41,023			€	47,179
Finished goods			55,334				27,127
Work in process and other			31,684				27,913
		€	128,041			€	102,219

Note 6. Debt

Debt consists of the following:

		September 30, 2011				December 31, 2010
Note payable to bank, included in a total loan credit facility of €827,950 to finance the construction related to the Stendal mill (a)		€	477,490			€	500,657
Senior notes due February 2013, interest at 9.25% accrued and payable semi-annually, unsecured (b)			—				15,341
Senior notes due December 2017, interest at 9.50% accrued and payable semi-annually, unsecured (c)			219,818				224,031
Subordinated convertible notes due January 2012, interest at 8.5% accrued and payable semi-annually (d)			—				31,707
Credit agreement with a lender with respect to a revolving credit facility of C$40 million (e)			—				15,016
Loan payable to the noncontrolling shareholder of the Stendal mill (f)			32,684				31,365
Credit agreement with a bank with respect to a revolving credit facility of €25,000 (g)			—				—
Investment loan agreement with a lender with respect to the wash press project at the Rosenthal mill of €4,351 (h)			2,719				3,807
Credit agreement with a bank with respect to a revolving credit facility of €3,500 (i)			—				—
			732,711				821,924
Less: current portion			(25,671	)			(39,596	)
Debt, less current portion		€	707,040			€	782,328

The Company made principal repayments under these facilities of €42,511 during the nine months ended September 30, 2011 (2010 — €14,461). As of September 30, 2011, the principal maturities of debt are as follows:

Matures		Amount
2011		€	—
2012			25,671
2013			41,088
2014			40,543
2015			44,000
Thereafter			581,409
		€	732,711

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 6. Debt (continued)

Certain of the Company’s debt instruments were issued under an indenture which, among other things, restricts Mercer Inc.’s ability and the ability of its restricted subsidiaries to make certain payments. These limitations are subject to other important qualifications and exceptions. As at September 30, 2011, the Company was in compliance with the terms of the indenture.

(a)

Note payable to bank, included in a total loan facility of €827,950 to finance the construction related to the Stendal mill (“Stendal Loan Facility”), interest at rates varying from Euribor plus 0.90% to Euribor plus 1.69% (rates on amounts of borrowing at September 30, 2011 range from 2.65% to 3.55%), principal due in required installments beginning September 30, 2006 until September 30, 2017, collateralized by the assets of the Stendal mill, with 48% and 32% guaranteed by the Federal Republic of Germany and the State of Saxony-Anhalt, respectively, of up to €417,490 of outstanding principal, subject to a debt service reserve account (“DSRA”) required to pay amounts due in the following twelve months under the terms of the Stendal Loan Facility; payment of dividends is only permitted if certain cash flow requirements are met. See Note 7 — Derivative Transactions for a discussion of the Company’s variable-to-fixed interest rate swaps.

On March 13, 2009, the Company finalized an agreement with its lenders to amend its Stendal Loan Facility. The amendment deferred approximately €164,000 of scheduled principal payments until the maturity date, September 30, 2017. The amendment also provided for a 100% cash sweep, referred to as the “Cash Sweep”, of any cash, in excess of a €15,000 working capital reserve and the guarantee amount, as discussed in Note 11, held by Stendal which will be used first to fund the DSRA to a level sufficient to service the amounts due and payable under the Stendal Loan Facility during the then following 12 months, which means the DSRA is “Fully Funded”, and second to prepay the deferred principal amounts. As at September 30, 2011, the DSRA balance was approximately €28,400 and increased to approximately €31,700 in October 2011.

(b)

In February 2005, the Company issued $310 million of senior notes due February 2013 (“2013 Notes”), which bore interest at 9.25%, accrued and payable semi-annually, and were unsecured.

On November 17, 2010, the Company used the proceeds from a private offering of $300 million senior notes due 2017, described in Note 6(c) below, and cash on hand to complete a tender offer to repurchase approximately $289 million aggregate principal amount of its 2013 Notes. Pursuant to the FASB’s Accounting Standards Codification No. 405, Liabilities — Extinguishment of Liabilities (“ASC 405-20”), the Company concluded that the tendering of the 2013 Notes met the definition of a debt extinguishment. In connection with this tender offer and pursuant to FASB’s Accounting Standards Codification No. 470-50, Debt-Modifications and Extinguishments (“ASC 470-50”), the Company recorded a loss of approximately €7,500 to the “Gain (loss) on extinguishment of debt” line in the Interim Consolidated Statement of Operations which included the tender premium paid and the write-off of unamortized debt issue costs.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 6. Debt (continued)

On February 15, 2011, the Company redeemed for cash all of its outstanding 2013 Notes, for a price equal to 100% of the principal amount of $20.5 million, plus accrued and unpaid interest to, but not including February 15, 2011. In total, the Company paid approximately $21.5 million (€15,900) in connection with the redemption of the 2013 Notes.

(c)

On November 17, 2010, the Company completed a private offering of $300 million in aggregate principal amount of senior notes due 2017 (“2017 Notes”). The proceeds from this offering were used to finance the tender offer and consent solicitation for approximately $289 million of the Company’s 2013 Notes (see Note 6(b)). The 2017 Notes were issued at a price of 100% of their principal amount. The 2017 Notes will mature on December 1, 2017 and bear interest at 9.50% which is accrued and payable semi-annually.

In August 2011, the Company’s Board of Directors authorized the purchase of up to $25.0 million of the Company’s 2017 Notes from time to time, over a period ending August 2012. During August 2011, the Company purchased approximately $4.4 million of its outstanding 2017 Notes, which in aggregate, were purchased at a nominal discount to the principal amount thereof, plus accrued and unpaid interest to, but not including the repurchase date. Pursuant to ASC 470-50, the Company recognized a loss of approximately €69 on the extinguishment of these notes, in the “Gain (loss) on extinguishment of debt” line in the Interim Consolidated Statement of Operations, mainly relating to the write-off of unamortized debt issuance costs. (See Note 12 — Subsequent Event).

The 2017 Notes are general unsecured senior obligations of the Company. The 2017 Notes rank equal in right of payment with all existing and future indebtedness of the Company and senior in right of payment to any current or future subordinated indebtedness of the Company. The 2017 Notes are effectively junior in right of payment to all borrowings of the Company’s restricted subsidiaries, including borrowings under the Company’s credit agreements which are secured by certain assets of its restricted subsidiaries.

The Company may redeem all or a part of the 2017 Notes, upon not less than 30 days or more than 60 days’ notice, at the redemption prices (expressed as percentages of principal amount) equal to 104.75% for the twelve-month period beginning on December 1, 2014, 102.38% for the twelve-month period beginning on December 1, 2015, and 100.00% beginning on December 1, 2016, and at any time thereafter, plus accrued and unpaid interest.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 6. Debt (continued)

(d)

In December 2009, the Company exchanged approximately $43.3 million of Subordinated Convertible Notes due October 2010 (the “2010 Notes”) through two private exchange agreements with the holders thereof for approximately $43.8 million of Subordinated Convertible Notes due January 2012 (the “2012 Notes”). On January 22, 2010, through an exchange offer with the remaining holders of the 2010 Notes, the Company exchanged a further $21.7 million of 2010 Notes for approximately $22.0 million of the Company’s 2012 Notes. The Company recognized both exchange transactions of the Subordinated Convertible Notes as extinguishments of debt in accordance with ASC 470-50, because the fair value of the embedded conversion option changed by more than 10% in both transactions. During 2010, the Company recognized a loss of €929 as a result of the January 22, 2010 exchange. The loss was determined using the fair market value prevailing at the time of the transaction, and yielded an effective interest rate of approximately 3% on the January 22, 2010 exchange.

The 2012 Notes bore interest at 8.50%, accrued and payable semi-annually, were convertible at any time by the holder into common shares of the Company at $3.30 per share and were unsecured. The Company could redeem for cash all or a portion of the 2012 Notes on or after July 15, 2011 at 100% of the principal amount plus accrued interest up to the redemption date. During the nine months ended September 30, 2011, approximately $44.4 million of 2012 Notes were converted into 13,446,679 common shares and the Company paid approximately $1.5 million of accrued and unpaid interest. Pursuant to the 2012 Notes indenture, on July 15, 2011, the nominal amount of remaining 2012 Notes were redeemed by the Company on July 15, 2011 at par plus accrued and unpaid interest to, but not including, July 15, 2011. In accordance with FASB’s Accounting Standards Codification No. 470-20, Debt — Debt with Conversions and Other Options (“ASC 470-20”), the Company recorded the carrying amount of the converted 2012 Notes, which included approximately €800 of unamortized discount, as an increase to share capital.

(e)

Credit agreement with respect to a revolving credit facility of C$40.0 million for the Celgar mill. The credit agreement matures May 2013. Borrowings under the credit agreement are collateralized by the mill’s inventory and receivables and are restricted by a borrowing base calculated on the mill’s inventory and receivables. Canadian dollar denominated amounts bear interest at bankers acceptance plus 3.75% or Canadian prime plus 2.00%. U.S. dollar denominated amounts bear interest at LIBOR plus 3.75% or U.S. base plus 2.00%. The Company fully repaid this facility on March 30, 2011. As at September 30, 2011, approximately C$2.1 million of this facility was supporting letters of credit, leaving approximately C$37.9 million available.

(f)

A loan payable by the Stendal mill to its noncontrolling shareholder bears interest at 7.00%, and is accrued semi-annually. The loan payable is unsecured, subordinated to all liabilities of the Stendal mill, non-recourse to the Company and its restricted subsidiaries, and is due in 2017. The balance includes principal and accrued interest. During the first quarter of 2010, the noncontrolling shareholder converted €6,275 of accrued interest into a capital contribution.

(g)

A €25,000 working capital facility at the Rosenthal mill that matures in December 2012. Borrowings under the facility are collateralized by the mill’s inventory and receivables and bear interest at Euribor plus 3.50%. As at September 30, 2011, approximately €2,200 of this facility was supporting bank guarantees leaving approximately €22,800 available.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 6. Debt (continued)

(h)

A four-year amortizing investment loan agreement with a lender relating to the new wash press at the Rosenthal mill with a total facility of €4,351 bearing interest at the rate of Euribor plus 2.75% that matures August 2013. Borrowings under this agreement are secured by the new wash press equipment. As at September 30, 2011, this facility was drawn by €2,719 and was accruing interest at a rate of 4.57%.

(i)

On February 8, 2010 the Rosenthal mill finalized a credit agreement with a lender for a €3,500 facility maturing in December 2012. Borrowings under this facility bear interest at the rate of the 3-month Euribor plus 3.50% and are secured by certain land at the Rosenthal mill. As at September 30, 2011, this facility was undrawn.

Note 7. Derivative Transactions

The Company is exposed to certain market risks relating to its ongoing business. The Company seeks to manage these risks through internal risk management policies as well as, from time to time, the use of derivatives. Currently, the only risk managed using derivative instruments is interest rate risk.

During 2004, the Company entered into certain variable-to-fixed interest rate swaps in connection with the Stendal Loan Facility with respect to an aggregate maximum principal amount of approximately €612,600 of the total indebtedness under the Stendal Loan Facility. Under the remaining interest rate swap, the Company pays a fixed rate and receives a floating rate with the interest payments being calculated on a notional amount. Currently, the contract has an aggregate notional amount of €426,518 at a fixed interest rate of 5.28% and it matures October 2017 (generally matching the maturity of the Stendal Loan Facility). The Company substantially converted the Stendal Loan Facility from a variable interest rate loan into a fixed interest rate loan, thereby reducing interest rate uncertainty.

The Company recognized an unrealized loss of €10,484 and a loss of €580 on the interest rate swap for the three and nine months ended September 30, 2011, respectively (2010 — a gain of €485 and loss of €10,523), in the “Gain (loss) on derivative instruments” line in the Interim Consolidated Statements of Operations and Interim Consolidated Statements of Cash Flows. Derivative instruments are required to be measured at their fair value. Accordingly, the fair value of the interest rate swap is presented in the “Unrealized interest rate derivative losses” line in the Interim Consolidated Balance Sheets, which currently amounts to a cumulative unrealized loss of €51,553 (2010 — €50,973).

The interest rate derivative contract is with the same bank that holds the Stendal Loan Facility and the Company does not anticipate non-performance by the bank.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 8. Pension and Other Post-Retirement Benefit Obligations

Included in pension and other post-retirement benefit obligations are amounts related to the Company’s Celgar and Rosenthal mills. The largest component of this obligation is with respect to the Celgar mill which maintains a defined benefit pension plan and post-retirement benefit plans for certain employees (“Celgar Plans”).

Pension benefits are based on employees’ earnings and years of service. The Celgar Plans are funded by contributions from the Company based on actuarial estimates and statutory requirements. Pension contributions during the three and nine month periods ended September 30, 2011 totaled €534 and €1,429, respectively (2010 — €280 and €677).

Effective December 31, 2008, the defined benefit plan was closed to new members. In addition, the defined benefit service accrual ceased on December 31, 2008, and members began to receive pension benefits, at a fixed contractual rate, under a new defined contribution plan effective January 1, 2009.

		Three Months Ended September 30,
		2011								2010
						Post-								Post-
		Pension				Retirement				Pension				Retirement
		Benefits				Benefits				Benefits				Benefits
Service cost		€	22			€	117			€	21			€	100
Interest cost			376				203				425				196
Expected return on plan assets			(385	)			—				(398	)			—
Recognized net loss (gain)			127				(17	)			111				(79	)
Net periodic benefit cost		€	140			€	303			€	159			€	217

		Nine Months Ended September 30,
		2011								2010
						Post-								Post-
		Pension				Retirement				Pension				Retirement
		Benefits				Benefits				Benefits				Benefits
Service cost		€	65			€	352			€	61			€	294
Interest cost			1,134				612				1,257				580
Expected return on plan assets			(1,163	)			—				(1,175	)			—
Recognized net loss (gain)			383				(52	)			329				(233	)
Net periodic benefit cost		€	419			€	912			€	472			€	641

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 9. Share Capital

Common shares

The Company has authorized 200,000,000 common shares (2010 — 200,000,000) with a par value of $1 per share.

During the nine months ended September 30, 2011, 13,446,679 common shares were issued as a result of certain holders of the 2012 Notes exercising their conversion option (see Note 6(d) — Debt). In addition, 358,268 shares were issued to employees of the Company as part of the stock based performance awards and 238,000 restricted shares were issued to the Chief Executive Officer and directors of the Company.

During the three months ended September 30, 2011, the Company repurchased and retired 1,263,401 common shares. These retired shares are now included in the Company’s pool of authorized but unissued common shares.

As at September 30, 2011 and December 31, 2010, the Company had 55,779,204 and 42,999,658 common shares issued and outstanding, respectively.

Share Repurchase Program

In August 2011, the Company’s Board of Directors authorized a share and debt repurchase program (the “Program”) to repurchase up to $25.0 million worth of the Company’s outstanding common shares and up to $25.0 million in aggregate principal amount of the Company’s 2017 Notes from time to time over a period ending August 2012. During the three months ended September 30, 2011, the Company repurchased 1,263,401 of its common shares at an aggregate cost of approximately $10.6 million. The Company recorded these as treasury shares, and accounted for the repurchase using the Cost Method as outlined in FASB’s Accounting Standards Codification No. 505-30, Equity —Treasury Stock (“ASC 505-30”).

The Company retired all such purchased shares prior to September 30, 2011. The retired shares had a carrying value of approximately €6,342. Upon the formal retirement of such shares and in accordance with ASC 505-30, the Company reduced its share capital based on the average cost of the common shares and reduced the treasury share account based on the repurchase price. The difference between the repurchase price and the original issue value was recorded as a reduction to retained earnings.

The Company may make additional repurchases of common shares under its Program, depending on prevailing market conditions, alternate uses of capital, and other factors. Whether and when to initiate a purchase of common shares and the amount of common shares purchased is at the Company’s discretion. As at September 30, 2011, the Company has an authorized amount of approximately $14.4 million left to repurchase its common shares, and has no treasury shares outstanding.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 9. Share Capital (continued)

Preferred shares

The Company has authorized 50,000,000 preferred shares (2010 — 50,000,000) with $1 par value issuable in series, of which 2,000,000 shares have been designated as Series A. The preferred shares may be issued in one or more series and with such designations and preferences for each series as shall be stated in the resolutions providing for the designation and issue of each such series adopted by the Board of Directors of the Company. The Board of Directors is authorized by the Company’s articles of incorporation to determine the voting, dividend, redemption and liquidation preferences pertaining to each such series. As at September 30, 2011, no preferred shares had been issued by the Company.

Note 10. Financial Instruments

The fair value of financial instruments at September 30, 2011 and December 31, 2010 is summarized as follows:

		September 30, 2011								December 31, 2010
		Carrying				Fair				Carrying				Fair
		Amount				Value				Amount				Value
Cash and cash equivalents		€	127,758			€	127,758			€	99,022			€	99,022
Marketable securities			4,191				4,191				275				275
Receivables			110,296				110,296				121,709				121,709
Note receivable			—				—				2,978				2,978
Accounts payable and accrued expenses			109,845				109,845				84,873				84,873
Debt			732,711				707,620				821,924				847,875
Interest rate derivative contract liability			51,553				51,553				50,973				50,973

The carrying value of cash and cash equivalents, notes receivable and accounts payable and accrued expenses approximates the fair value due to the immediate or short-term maturity of these financial instruments. The carrying value of receivables approximates the fair value due to their short-term nature and historical collectability. The fair value of debt reflects recent market transactions and discounted cash flow estimates. The fair value of the interest rate derivative is calculated by discounting the future interest rate payments using a yield curve derived by a recognized financial institution. Marketable securities are recorded at fair value based on recent transactions.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 10. Financial Instruments (continued)

The fair value methodologies and, as a result, the fair value of the Company’s investments and derivative instruments are determined based on the fair value hierarchy provided in FASB’s Accounting Standards Codification No. 820, Fair Value Measurements (“ASC 820”). The fair value hierarchy per ASC 820 is as follows:

Level 1 — Valuations based on quoted prices in active markets for identical assets and liabilities.

Level 2 — Valuations based on observable inputs in active markets for similar assets and liabilities, other than Level 1 prices, such as quoted interest or currency exchange rates.

Level 3 — Valuations based on significant unobservable inputs that are supported by little or no market activity, such as discounted cash flow methodologies based on internal cash flow forecasts.

The Company classified its marketable securities within Level 1 of the valuation hierarchy where quoted prices are available in an active market. Level 1 investments include exchange-traded equities and German federal government bonds. The Company classified the German federal government bonds as available for sale as it is not certain these investments will be held until maturity, nor does the Company intend to actually trade these investments.

The Company’s derivatives are classified within Level 2 of the valuation hierarchy, as they are traded on the over-the-counter market and are valued using internal models that use as their basis readily observable market inputs, such as forward interest rates.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 10. Financial Instruments (continued)

The valuation techniques used by the Company are based upon observable inputs. Observable inputs reflect market data obtained from independent sources. In addition, the Company considered the risk of non-performance of the obligor, which in some cases reflects the Company’s own credit risk, in determining the fair value of the derivative instruments. The counterparty to our interest rate swap derivative is a multi-national financial institution.

The following table presents a summary of the Company’s outstanding financial instruments and their estimated fair values under the hierarchy defined in ASC 820:

		Fair value measurements at September 30, 2011 using:
		Quoted prices
		in active markets				Significant other				Significant
		for identical assets				observable inputs				unobservable inputs
Description		(Level 1)				(Level 2)				(Level 3)				Total
Assets
Marketable securities (a)
German federal government bonds		€	4,013			€	—			€	—			€	4,013
Exchange traded equities			178				—				—				178
Total		€	4,191			€	—			€	—			€	4,191
Liabilities
Derivatives (b)
Interest rate swap		€	—			€	51,553			€	—			€	51,553

Note 11. Commitments and Contingencies

The Company is involved in certain legal actions and claims arising in the ordinary course of business. While the outcome of these legal actions and claims cannot be predicted with certainty, it is the opinion of management that the outcome of any such claim which is pending or threatened, either individually or on a combined basis, will not have a material adverse effect on the consolidated financial condition, results of operations or liquidity of the Company.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 11. Commitments and Contingencies (continued)

Pursuant to an arbitration proceeding with the general construction contractor of the Stendal mill regarding certain warranty claims, the Company acted upon a bank guarantee for defect liability on civil works that was about to expire as provided in the engineering, procurement, and construction contract. On January 28, 2011, the Company received approximately €10,000 (the “Guarantee Amount”), which is intended to compensate the Company for remediation work that is required at the Stendal mill, but it is less than the amount claimed by the Company under the arbitration. The Guarantee Amount was recognized as an increase in cash, and a corresponding increase in accounts payable. Since receiving the €10,000 Guarantee Amount, the Company has recorded approximately €1,400 of costs for remediation work at the Stendal mill, which leaves approximately €8,600 remaining for future remediation work. As the arbitration proceeding remains ongoing, there is no certainty that the Company will be successful with its claims or whether the costs recorded to date will qualify as eligible expenditures.

Note 12. Subsequent Event

In October 2011, the Company purchased approximately $9.3 million of the outstanding 2017 Notes, at a nominal discount to the principal amount thereof, plus accrued and unpaid interest to, but not including the repurchase date.

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 13. Restricted Group Supplemental Disclosure

The terms of the indenture governing our 9.5% senior unsecured 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 and nine months ended September 30, 2011 and 2010, 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.

Combined Condensed Balance Sheets

		September 30, 2011
		Restricted				Unrestricted								Consolidated
		Group				Subsidiaries				Eliminations				Group
ASSETS
Current assets
Cash and cash equivalents		€	60,426			€	67,332			€	—			€	127,758
Marketable securities			4,013				—				—				4,013
Receivables			60,639				49,657				—				110,296
Inventories			71,404				56,637				—				128,041
Prepaid expenses and other			6,309				3,598				—				9,907
Deferred income tax			24,951				—				—				24,951
Total current assets			227,742				177,224				—				404,966
Long-term assets
Property, plant and equipment			345,077				470,650				—				815,727
Deferred note issuance and other			6,229				3,714				—				9,943
Due from unrestricted group			86,623				—				(86,623	)			—
Total assets		€	665,671			€	651,588			€	(86,623	)		€	1,230,636
LIABILITIES
Current liabilities
Accounts payable and accrued expenses		€	56,258			€	53,587			€	—			€	109,845
Pension and other post-retirement benefit obligations			694				—				—				694
Debt			1,088				24,583				—				25,671
Total current liabilities			58,040				78,170				—				136,210
Long-term liabilities
Debt			221,449				485,591				—				707,040
Due to restricted group			—				86,623				(86,623	)			—
Unrealized interest rate derivative losses			—				51,553				—				51,553
Pension and other post-retirement benefit obligations			23,010				—				—				23,010
Capital leases and other			6,557				5,300				—				11,857
Deferred income tax			14,413				—				—				14,413
Total liabilities			323,469				707,237				(86,623	)			944,083
EQUITY
Total shareholders’ equity (deficit)			342,202				(38,320	)			—				303,882
Noncontrolling interest (deficit)			—				(17,329	)			—				(17,329	)
Total liabilities and equity		€	665,671			€	651,588			€	(86,623	)		€	1,230,636

MERCER INTERNATIONAL INC.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands of Euros, except per share data)

Note 13. Restricted Group Supplemental Disclosure (continued)

Combined Condensed Balance Sheets

		December 31, 2010
		Restricted				Unrestricted								Consolidated
		Group				Subsidiaries				Eliminations				Group
ASSETS
Current assets
Cash and cash equivalents		€	50,654			€	48,368			€	—			€	99,022
Receivables			70,865				50,844				—				121,709
Inventories			60,910				41,309				—				102,219
Prepaid expenses and other			6,840				4,520				—				11,360
Deferred income tax			22,570				—				—				22,570
Total current assets			211,839				145,041				—				356,880
Long-term assets
Property, plant and equipment			362,274				484,493				—				846,767
Deferred note issuance and other			6,903				4,179				—				11,082
Due from unrestricted group			80,582				—				(80,582	)			—
Note receivable			1,346				—				—				1,346
Total assets		€	662,944			€	633,713			€	(80,582	)		€	1,216,075
LIABILITIES
Current liabilities
Accounts payable and accrued expenses		€	44,015			€	40,858			€	—			€	84,873
Pension and other post-retirement benefit obligations			728				—				—				728
Debt			16,429				23,167				—				39,596
Total current liabilities			61,172				64,025				—				125,197
Long-term liabilities
Debt			273,473				508,855				—				782,328
Due to restricted group			—				80,582				(80,582	)			—
Unrealized interest rate derivative losses			—				50,973				—				50,973
Pension and other post-retirement benefit obligations			24,236				—				—				24,236
Capital leases and other			7,154				4,856				—				12,010
Deferred income tax			7,768				—				—				7,768
Total liabilities			373,803				709,291				(80,582	)			1,002,512
EQUITY
Total shareholders’ equity (deficit)			289,141				(53,073	)			—				236,068
Noncontrolling interest (deficit)			—				(22,505	)			—				(22,505	)
Total liabilities and equity		€	662,944			€	633,713			€	(80,582	)		€	1,216,075