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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
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Pre-commencement
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Pre-commencement
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Mercer
International
Inc. |
Stone
Venepal
(Celgar)
Pulp Inc. |
Pro
Forma
Adjustments |
Notes |
Consolidated
Pro
Forma |
||||||||||||
|
(For
the Period January 1, 2005 to February 13, 2005)
|
||||||||||||||||
|
Revenues |
€ |
227,502 |
€ |
21,723 |
€ |
- |
€ |
249,225 |
||||||||
|
Costs
and expenses: |
||||||||||||||||
|
Cost
of sales |
210,167 |
19,613 |
1,041 |
4(b)(i |
) |
230,821 |
||||||||||
|
General
and administrative expenses |
15,316 |
1,166 |
(570 |
) |
4(b)(ii |
) |
15,912 |
|||||||||
|
Gain
on sale of emission credits |
(6,288 |
) |
- |
- |
(6,288 |
) | ||||||||||
|
Total
costs and expenses |
219,195 |
20,779 |
471 |
240,445 |
||||||||||||
|
Income
from operations |
8,307 |
944 |
471 |
8,780 |
||||||||||||
|
Other
income (expense) |
||||||||||||||||
|
Interest
expense |
(41,463 |
) |
(3,947 |
) |
2,365 |
4(b)(iii |
) |
(43,138 |
) | |||||||
|
(93 |
) |
4(b)(iv |
) |
|||||||||||||
|
Investment
income |
981 |
- |
(185 |
) |
4(b)(vii |
) |
796 |
|||||||||
|
Realized
loss on derivative financial instruments |
(295 |
) |
- |
295 |
4(b)(v |
) |
- |
|||||||||
|
Unrealized
loss on derivative financial instruments |
(73,015 |
) |
(9 |
) |
- |
4(b)(v |
) |
(73,024 |
) | |||||||
|
Unrealized
foreign exchange loss on debt |
(7,509 |
) |
(10,544 |
) |
2,826 |
4(b)(vi |
) |
(15,227 |
) | |||||||
|
Impairment
of investments |
(1,645 |
) |
- |
- |
(1,645 |
) | ||||||||||
|
Total
other expense |
(122,946 |
) |
(14,500 |
) |
5,208 |
(132,238 |
) | |||||||||
|
Loss
before income taxes and minority
interest |
(114,639 |
) |
(13,556 |
) |
4,737 |
(123,458 |
) | |||||||||
|
Income
tax (provision) benefit |
21,412 |
- |
- |
21,412 |
||||||||||||
|
Loss
before minority interest |
(93,227 |
) |
(13,556 |
) |
4,737 |
(102,046 |
) | |||||||||
|
Minority
interest |
11,409 |
- |
- |
11,409 |
||||||||||||
|
Net
loss |
€ |
(81,818 |
) |
€ |
(13,556 |
) |
€ |
4,737 |
€ |
(90,637 |
) | |||||
|
Loss
per share |
||||||||||||||||
|
Basic
and diluted |
€ |
(2.80 |
) |
€ |
(2.74 |
) | ||||||||||
|
Number
of shares outstanding for computing basic and diluted loss per
share |
29,270,388 |
33,063,455 |
||||||||||||||
|
US$ |
C$ |
||||||
|
Average
for the three months ending June 30, 2005 |
1.2598 |
1.2439 |
|||||
|
Average
for the period January 1, 2005 to February 13, 2005 |
N/A |
1.6058 |
|||||
|
Purchase
price: |
||||
|
Cash
(including defined working capital) |
€ |
142,940 |
||
|
Equity —
shares of beneficial interest |
30,814 |
|||
|
Estimated
acquisition costs |
3,668 |
|||
|
|
€ |
177,422 |
||
|
Net
assets acquired: |
||||
|
Receivables |
€ |
32 |
||
|
Inventory |
19,969 |
|||
|
Prepaids
and other assets |
616 |
|||
|
Property,
plant and equipment |
175,096 |
|||
|
Accrued
expenses and other liabilities |
(4,103 |
) | ||
|
Pension
plan and post-retirement benefits obligation |
(14,188 |
) | ||
|
|
€ |
177,422 |
|
(i) |
The
Company acquired the assets as described in Note 3 from
KPMG Inc., as receiver of Celgar. |
|
(ii) |
The
Company issued 4,210,526 shares of beneficial interest at a price of
US$9.50 per share which represents €30,814 (US$40,000) of the purchase
price as described in Note 3 as partial consideration for the
Acquisition. |
|
(iii) |
The
Company issued 10,768,700 shares of beneficial interest at a price of
US$8.50 per share for gross proceeds of €70,338 (US$91,534) to finance the
Acquisition, refinance all the bank indebtedness of our Rosenthal mill and
for general corporate purposes. The issue price of US$8.50 per share was
based on the last reported sale price of our shares of beneficial interest
on the Nasdaq National Market on February 8, 2005, market conditions and
demand for our equity securities. |
|
(iv) |
The
Company issued 9.25% senior notes due 2013 for gross proceeds of €238,811
(US$310,000) to finance the Acquisition, refinance all the bank
indebtedness of our Rosenthal mill and for general corporate purposes. The
interest rate and aggregate principal amount of debt securities issued was
based on market conditions and the demand for our debt securities.
|
|
(b) |
Assumptions
for pro forma consolidated statement of operation for the six months
ended June 30, 2005: |
|
(i) |
Amortization
expense has been increased by €1,041 to reflect harmonization of
depreciation policies. |
|
(ii) |
Reduce
general and administrative expenses by €570 which are non-recurring
professional costs related to the oversight of the Celgar mill by the
receiver and trustee. These costs are not incurred after the date of the
Acquisition as these services are provided by the Company's senior
officers. |
|
(iii) |
Reduced
interest expense of €2,365 has been recorded to reflect the reversal of
interest on the Celgar debt and the refinancings of the Rosenthal debt,
offset by the €238,811 (US$310,000) debt securities financing.
|
|
(iv) |
Amortization
of deferred financing costs of €93 has been charged to interest expense.
|
|
(v) |
A
decrease in derivative financial instruments, net of €295 to reflect
derivatives settled on the refinancing of the Rosenthal debt. These
derivatives and the Rosenthal debt were settled and refinanced with
partial proceeds from the issuance of our debt securities.
|
|
(vi) |
A
decrease in foreign exchange loss of €2,826 on the Celgar term facility to
reflect the new financing inherent in the Acquisition. The Company did not
assume such Celgar term facility pursuant to the Acquisition
(Note 3). |
|
(vii) |
Reduced
investment income of €185 to reflect the reduction of interest earned on
restricted cash utilized in the refinancing of the Rosenthal debt.
|
|
(viii) |
No
tax expense has been recorded for items (i) thru (vii) above as
the Company had sufficient tax loss carry-forwards available that were
utilized against taxes payable. The Company maintains a valuation reserve
against the majority of these loss carry-forwards due to uncertainties
regarding future taxable income. |