Verso Paper Posts Third Quarter Profit
Nov. 7, 2008 - Verso Paper Corp. today reported financial results for the three months ended September 30, 2008. Highlights for the third quarter include:
- Net sales of $485.4 million in the third quarter of 2008 compared to $450.6 million during the prior-year period.
- Operating income of $46.2 million in the third quarter of 2008 compared to $10.5 million for the same period in 2007.
- Net income of $18.5 million, or $0.36 per share, for the third quarter of 2008 compared to net loss of $25.8 million, or $0.68 per share, for the third quarter of 2007.
- Adjusted EBITDA of $81.4 million for the third quarter of 2008, compared to $52.6 million for the third quarter of 2007.
“Our third quarter 2008 results reflect significant improvement with operating income of $46.2 million compared to $10.4 million for the same period last year,” said Mike Jackson, President and CEO of Verso. “The growth in net sales was driven by a 20% increase in average sales prices compared with the third quarter of last year, partially offset by a 10% decline in sales volume. This decline in volume reflected lower coated paper demand in a difficult economic environment, compared to unusually strong demand in the third quarter of last year. In response, and consistent with our commitment to balance demand for our products with our production, Verso took 13,000 tons of downtime in the third quarter. As previously announced, we intend to take an additional 80,000 tons of downtime during the fourth quarter.
“We generated significant margin improvement on a comparable-quarter basis through higher paper prices, our proactive production management and improved operating efficiencies during the quarter. Our gross margin improved to 20.5% in the third quarter of 2008 from 14.2% last year despite significantly increased input prices for our key direct expenses.
“Our third quarter results provide further evidence that, despite conditions in the credit markets and the national economy, Verso has ample liquidity and is well positioned to fund its operations and anticipated growth. During the third quarter, increased working capital needs were funded primarily with cash flow from operations. For the fourth quarter, our anticipated capital expenditures are relatively modest and our cash flows will continue to benefit from Verso’s favorable tax attributes. In addition, at the end of the third quarter, we had $167 million available on our revolving credit facility after deducting $33 million in issued standby letters of credit. This credit facility does not mature for nearly four years, and all our other debt instruments mature in 2013 or later.”
Mr. Jackson concluded, “The third quarter results demonstrated the value we can create in a challenging economic environment by maintaining our disciplined approach to balancing our supply and demand and to managing our cost structure and financial position. We expect favorable pricing in the fourth quarter and continued historically high costs for key input items, although cost trends for certain of these items began to improve late in the third quarter and are expected to continue to ease in the fourth quarter. We will continue to monitor demand carefully and to take decisive action to preserve and strengthen our ability to achieve our objectives for long-term growth in earnings and stockholder value.”
Net sales for the third quarter of 2008 increased 7.7% to $485.4 million from $450.6 million in the third quarter of 2007. The improvement was the result of a 20.1% increase in average sales prices, while sales volume decreased 10.3% from the third quarter of 2007 reflecting lower coated paper demand in a difficult economic environment compared to unusually strong demand last year.
Net sales for our coated and supercalendered papers segment increased 6.5% to $432.6 million in the third quarter of 2008 from $406.2 million in the third quarter of 2007. The increase reflects a 22.0% increase in average paper sales prices and a 12.7% decrease in paper sales volumes for the third quarter of 2008 compared to the same period last year.
Net sales for our market pulp segment increased 17.4% to $41.0 million in the third quarter of 2008 from $35.0 million for the same period in 2007. This increase was due to a 12.1% increase in average sales prices combined with a 4.7% increase in sales volume compared to the third quarter of 2007.
Net sales for our other segment increased 26.0% to $11.8 million in the third quarter of 2008 from $9.4 million in the third quarter of 2007. The improvement reflects a 14.2% increase in average sales prices and a 10.3% increase in sales volume compared to the third quarter of 2007.
Based in Memphis, Tennessee, Verso Paper Corp. is a leading North American producer of coated papers, including coated groundwood and coated freesheet, and supercalendered and specialty products.
SOURCE: Verso Paper Corp.