NewPage Posts Fourth Quarter Loss on Lower Volumes
Feb. 18, 2010 - NewPage Corporation today announced its results of operations for the fourth quarter and the full year 2009. Net sales were $857 million in the fourth quarter of 2009 compared to $977 million in the fourth quarter of 2008, a decrease of $120 million, or 12%. For the full year 2009, net sales were $3,106 million compared to $4,356 million for 2008, a decrease of $1,250 million, or 29%. Sales volume of coated paper improved during the fourth quarter of 2009 compared to the fourth quarter of 2008, but declined for the full year 2009 compared to 2008. The decrease in net sales also reflects lower coated paper prices during the fourth quarter and full year 2009 compared to the similar periods in 2008.
Net loss attributable to the company was $(55) million in the fourth quarter of 2009 compared to $(42) million in the fourth quarter of 2008. For the full year 2009, net loss attributable to the company was $(308) million, including $(133) million related to debt refinancing in the third quarter of 2009, compared to $(117) million in 2008. Debt covenant EBITDA (earnings before interest, taxes, depreciation and amortization) was $432 million in 2009 compared to $611 million in 2008.
The decline in debt covenant EBITDA is primarily the result of significantly lower sales volumes and lower average sales prices partially offset by income from alternative fuel mixture tax credits, reductions in raw material costs and ongoing productivity improvements.
"With the elimination of covenants tied to EBITDA in September 2009, we focused on generating cash by significantly reducing our finished goods inventories," said Mark A. Suwyn, NewPage Corporation Chairman.
"As orders improved, we filled sales orders from inventory while still taking 104,000 tons of downtime in the fourth quarter. Our EBITDA for the quarter was depressed as a result of these actions along with planned higher maintenance charges, but we generated over $100 million of cash from reducing inventories and managing our accounts receivable and accounts payable. In addition, it sets us up for a stronger 2010 as we entered the year with inventories much more in line with our business levels," Suwyn said.
"During 2009 we faced very challenging market conditions. Overall industry shipments of coated papers were off 20 percent as print advertising reacted to the uncertain economy and customers reduced their inventories of paper," added Suwyn.
"During 2009, we took approximately 515,000 tons of market-related downtime that included the indefinite shutdown of two paper machines – one in Rumford, Maine and one in Whiting, Wisconsin," said Suwyn. "We believe inventories have now essentially bottomed out through the mill and printer system, and we have seen some rebound in orders over the past couple of months that have allowed us to restart production on these machines. While a couple of months do not make a trend, our customers indicate print advertising appears to be in the early stages of recovery.
"We also continued our relentless focus on Lean Six Sigma (LSS), and now have 3,800 people trained in LSS," added Suwyn. "Our employee efforts have had a significant impact on our costs and productivity is growing every day. In 2009, we realized $60 million in hard savings through 470 completed LSS projects. Since deployment, LSS has realized $149 million and completed over 900 LSS projects."
Interest expense for 2009 was $418 million compared to $277 million for 2008. Included in interest expense for 2009 is a loss of $85 million on the extinguishment of debt and $48 million of unrealized losses on our interest rate swaps reclassified from accumulated other comprehensive income (loss) as a result of the retirement of the senior secured term loan in September 2009.
As previously reported, the U.S. Internal Revenue Code allowed a refundable excise tax credit for alternative fuel mixtures produced for sale or for use as a fuel in a trade or business. This credit expired on December 31, 2009. Income recognized for the credit is included in net income (loss) attributable to the company and totaled $90 million for the fourth quarter of 2009 and $304 million for the full year 2009. We believe that generally the industry passed on most of the benefits of the alternative fuel mixture credit to customers in the form of lower sales prices.
NewPage closed the year with $224 million of liquidity, consisting of $5 million of cash and cash equivalents and $219 million of additional borrowing availability under the revolving credit facility after reduction for $94 million in letters of credit and $52 million in outstanding borrowings under the revolving credit facility. The amount available under the revolving credit facility takes into consideration the requirement to maintain a minimum availability of $50 million through March 2011 that was added as part of the amendment to the revolving credit facility in September 2009.
David J. Prystash, Senior Vice President and Chief Financial Officer for NewPage commented, "The actions we took to adjust our inventories were reflected in the fourth quarter cash flows. We generated $100 million of cash flows from managing our inventory, accounts receivable and accounts payable that allowed us to improve our liquidity and pay down debt."