Verso Paper Reports 3Q Net Loss of $19.2 Million
Oct. 3, 2010 - Verso Paper Corp. today reported financial results for the third quarter and nine months ended September 30, 2010. Results for the periods ended September 30, 2010 and 2009 include:
- Net sales increased 9.7% to $432.9 million in the third quarter of 2010 from $394.7 million in the third quarter of 2009.
- Operating income of $12.9 million in the third quarter of 2010 compared to $7.4 million in the third quarter of 2009.
- Net loss before items of $18.6 million in the third quarter of 2010, or $0.35 per diluted share, compared to a net loss before items of $18.1 million, or $0.35 per diluted share in the third quarter of 2009.
- Adjusted EBITDA before pro forma effects of profitability program of $81.6 million for the first nine months of 2010 compared to $44.3 million for the first nine months of 2009. (Note: EBITDA and Adjusted EBITDA are non-GAAP financial measures and are defined and reconciled to net income later in this release).
Verso’s coated paper shipments increased 26.3% in the first nine months of 2010 compared to the same period last year. Year over year market conditions have improved due to a stronger economy and a better balance between supply and demand. Coated paper shipments increased 8.1% in the third quarter of 2010 compared to the second quarter of 2010. Coated paper prices increased 4.9% in the third quarter of 2010 compared to the second quarter of 2010. However, coated paper prices for the third quarter of 2010 were slightly below last year’s third quarter levels, as prices declined throughout 2009 and into early 2010 due to weak demand resulting from the global economic recession.
Verso’s net sales for the third quarter of 2010 increased $38.2 million, or 9.7%, as sales volume grew 7.1% compared to last year’s third quarter. The average sales price for all of our products increased 2.4% in the third quarter of 2010 compared to the same period last year. Verso’s gross margin was 14.1% for the third quarter of 2010 compared to 14.2% for the same period in 2009 and 9.1% for the second quarter of 2010.
We continue to assess and implement, as appropriate, various cost reduction initiatives. Our company-wide cost reduction program produced approximately $11 million of savings during the third quarter of 2010. Management expects this program to yield an additional $20 million in cost reductions over the next six months and continues to search for and develop additional cost savings opportunities. Included in this program are productivity improvements, material usage reductions, energy usage reductions, labor cost savings, material and chemical substitution, and workforce planning improvements.
We also continue to develop and execute our renewable energy strategy. In the first nine months of 2010, we received $6.0 million in reimbursements from a $9.3 million American Recovery and Reinvestment Act of 2009 grant for the deployment of waste energy recovery technologies. In addition, we announced the launch of a $43 million renewable energy project at our mill in Quinnesec, Michigan, which will position the mill to meet more than 95% of its energy needs using renewable biomass sources.
“Our third quarter results were very encouraging from a pure operating perspective,” said Mike Jackson, President and Chief Executive Officer of Verso. “We recognized a $13 million operating profit as our sales volume, EBITDA and operating performance improved over our second quarter results, consistent with the outlook we gave on last quarter’s earnings call.
“We have moved into a more stable demand scenario, which has helped to move prices up from the very low levels experienced in March of this year. I was pleased with the operating performance of our mills, which rebounded from a below average second quarter.
“Safety, I believe, is the leading indicator of the productivity, health, success and morale of an organization. Through the third quarter, Verso has experienced its best safety performance since the Company’s inception. As many of us know, poor safety records drive higher worker’s compensation cases and lost workdays, all of which can potentially add millions in extra costs. Verso now finds its safety ranking in the top 10% of all U.S. industries. I thank all of our employees for this record.
“We look forward to improved EBITDA results in the fourth quarter, driven by continued operating and pricing improvements.”
Verso reported a net loss of $19.2 million in the third quarter of 2010, or $0.36 per diluted share, which included $0.6 million of charges from special items, or $.01 per diluted share, primarily due to costs associated with new product development. Verso had net income of $43.5 million, or $0.83 per diluted share, in the third quarter of 2009, which included net benefits of $61.6 million, or $1.18 per diluted share, primarily related to alternative fuel mixture tax credits and net gains related to the early retirement of debt.
Verso reported a net loss of $117.1 million, or $2.23 per diluted share, for the first nine months of 2010, which included $3.7 million of charges from special items, or $0.07 per diluted share, primarily due to costs associated with new product development. Verso had net income of $87.8 million, or $1.69 per diluted share, for the first nine months of 2009, which included $234.3 million of net benefits, or $4.50 per share, primarily related to alternative fuel mixture tax credits and net gains related to the early retirement of debt.
Included in our results for the nine months ended September 30, 2009, were $189.1 million in pre-tax net benefits from alternative fuel mixture tax credits provided by the U.S. government for our use of black liquor in alternative fuel mixtures. Since the tax credit, as it relates to liquid fuels derived from biomass, expired on December 31, 2009, we did not recognize any benefit from this tax credit in 2010. Additionally, we recognized $57.8 million in pre-tax net gains from the early retirement of debt at a discount in the first nine months of 2009. We have excluded the impact of these items from our Adjusted EBITDA figures.
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. Verso’s paper products are used primarily in media and marketing applications, including magazines, catalogs and commercial printing applications such as high-end advertising brochures, annual reports and direct-mail advertising.
SOURCE: Verso Paper