NewPage Fourth Quarter Loss Narrows
March 25, 2008 - NewPage Corporation today announced its financial results of operations for the fourth quarter and the full year 2007. Net sales were $652 million in the fourth quarter of 2007 compared to $519 million in the fourth quarter of 2006, an increase of 25.6%. For the full year 2007, net sales were $2,168 million compared to $2,038 million for 2006, an increase of 6.4%. Net loss was $4 million in the fourth quarter of 2007 compared to a net loss of $20 million in the fourth quarter of 2006. For the full year 2007, there was a net loss of $8 million compared to a net loss of $32 million in 2006. Earnings before interest, taxes, depreciation and amortization (EBITDA) was $93 million for the fourth quarter of 2007 compared to EBITDA of $56 million for the fourth quarter of 2006. For the full year, EBITDA was $284 million in 2007 and $262 million in 2006.
The company's financial statements include the results of Stora Enso North America Inc. (SENA) since December 21, 2007, when NewPage completed the acquisition of SENA from Stora Enso Oyj (SEO) for cash of $1.5 billion and $200 million of notes issued to SEO by NewPage Group Inc., the indirect parent of NewPage. In addition, SEO received a 19.9% equity interest in NewPage Group Inc.
"Fourth quarter 2007 volume improved significantly compared to the fourth quarter of 2006 and, in fact, it was the highest volume quarter on record for NewPage," said Mark A. Suwyn, chairman of the board and chief executive officer. "For the year 2007, coated paper volumes increased primarily as a result of growth in the second half as some competitive capacity was shut down. Selling prices began to improve in the fourth quarter as a result of the tighter market for coated paper."
From an operations perspective, we had another outstanding year in terms of productivity. However, these benefits were partially offset by the impact of fuel and raw material inflation as oil prices rose to nearly $100 dollars per barrel in the fourth quarter," said Richard D. Willett, Jr., president and chief operating officer. "We anticipate continued cost inflation during the first half of 2008. In conjunction with our annual maintenance shutdowns, we incurred costs of approximately $30 million in 2007 and approximately $20 million in 2006 that were primarily comprised of unabsorbed fixed costs from lower production volumes and incremental costs for purchased materials and energy that would otherwise have been produced as part of normal operations of our mills. The increases in SG&A expenses were primarily driven by costs for equity compensation, severance and legal services."
Interest expense for the fourth quarter was $57 million in 2007 compared to $35 million in 2006. The increase in the quarter to quarter comparison resulted from the write-off of $17 million of financing costs in 2007 as a result of the debt refinancing in connection with the acquisition of SENA. For the full year, interest expense in 2007 was $154 million compared to $146 million in 2006. The year over year increase was from the $17 million write- off, partially offset by lower average debt balances outstanding and a lower interest rate on the term loan, prior to the debt refinancing in December 2007.
For the full year, EBITDA was $284 million for 2007 and $262 million for 2006. The company also recorded the following items during 2007 and 2006.
- 2007: $14 million of non-cash equity compensation and $5 million of
costs related to severance and integration resulting from the SENA
- 2006: $65 million gain on the sale of the hydroelectric generating
facilities; $47 million non-cash losses on the basket option
contract; $11 million of non-cash equity award expense; $8 million of
expenses for transition costs; and $19 million of non-cash charges
and loss on the sale of the carbonless paper business included in the
loss from discontinued operations.
"It's important to note for the year that prior to the acquisition, we were able to generate strong cash flow that allowed us to reduce our senior secured debt by $74 million," added Suwyn. "Overall, we generated cash flows from operating activities of $278 million, a substantial increase from the $180 million we generated in 2006 and we increased cash on hand by $99 million." There were no outstanding borrowings under the revolving senior secured credit facility as of December 31, 2007. Based on availability under the borrowing base as of that date, there was $380 million of additional borrowing availability under the revolving senior secured credit facility as of December 31, 2007.
"We expect operating rates in the coated paper markets to remain relatively high in the first half of 2008, the result of capacity closures, along with some growth in advertising spending. Longer term, the strength of the U.S. economy and the role of imports remains uncertain. While the weak dollar is slowing import growth, the economy's impact on advertising is uncertain," commented Suwyn.
As previously mentioned, NewPage completed the acquisition of SENA on December 21, 2007, and on January 16, 2008, the company announced key steps being taken to integrate the two operations, including the permanent shutdown of paper machines in Rumford, Maine and Kimberly, Wisconsin; a converting facility in Chillicothe, Ohio, and a paper mill in Niagara, Wisconsin. "We remain on track to meet our long-term goal of $265 million in annual synergies that were announced as part of the acquisition and integration communications. We believe that these restructuring decisions will create the platform essential to become one company, remain competitive in the marketplace, serve our customers more efficiently, and achieve our vision of becoming the best printing paper company in North America," commented Willett.
About NewPage Corporation
Headquartered in Miamisburg, Ohio, NewPage Corporation is the largest printing paper manufacturer in North America, based on production capacity, with $4.5 billion in pro forma net sales for the year ended December 31, 2007. The company's product portfolio is the broadest in North America and includes coated freesheet, coated groundwood, supercalendered, newsprint and specialty papers. These papers are used for corporate collateral, commercial printing, magazines, catalogs, books, coupons, inserts, newspapers, packaging applications and direct mail advertising.
NewPage owns paper mills in Kentucky, Maine, Maryland, Michigan, Minnesota, Nova Scotia, and Wisconsin. These mills have a total annual production capacity of approximately 5.5 million tons of paper, including approximately 4.3 million tons of coated paper, approximately 920,000 tons of uncoated paper and approximately 300,000 tons of specialty paper, as well as approximately 3.2 million tons of pulp.
SOURCE: NewPage Corp.