Verso Paper Reports 2010 Fourth Quarter Results
March 3, 2011 - Verso Paper Corp. reported financial results for the fourth quarter and year ended December 31, 2010. Results for the periods ended December 31, 2010 and 2009 include:
- Net sales increased 7.0% to $407.7 million in the fourth quarter of 2010 from $381.0 million in the fourth quarter of 2009.
- Operating income of $17.4 million in the fourth quarter of 2010 compared to an operating loss of $4.6 million in the fourth quarter of 2009.
- Net loss before items of $13.0 million in the fourth quarter of 2010, or $0.25 per diluted share, compared to a net loss before items of $34.6 million, or $0.66 per diluted share in the fourth quarter of 2009.
- Adjusted EBITDA before pro forma effects of profitability program of $132.1 million for the year ended December 31, 2010, compared to $76.7 million in 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 total sales volume increased 19.7% in 2010 compared to 2009, as market conditions improved due to a stronger economy and a better balance between supply and demand. Sales volume was stable in the fourth quarter of 2010 compared to the fourth quarter of 2009, and fell 8.5% from the seasonally strong third quarter of 2010. The average sales price for all of our products increased 7.1% in the fourth quarter of 2010 compared to the fourth quarter of 2009 and grew 2.9% from the third quarter of 2010, reflecting the improving economic conditions and stronger demand for our coated paper products. Although the average sales price for the year ended December 31, 2010, was 1.4% below the average price realized in 2009, prices have been increasing since the second quarter of 2010.
Verso’s net sales for the fourth quarter of 2010 increased $26.7 million, or 7.0%, as the average sales price for all of our products increased 7.1% compared to the fourth quarter of 2009. Verso’s gross margin was 17.2% for the fourth quarter of 2010 compared to 11.6% for the same period in 2009 and 14.1% for the third quarter of 2010.
We continue to assess and implement, as appropriate, various cost reduction initiatives. Our company-wide cost reduction program produced approximately $41 million of savings during 2010, of which approximately $11 million was realized during the fourth quarter. Management continues to search for and develop additional cost savings opportunities and expects this program to yield an additional $56 million in cost reductions. 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 2010, we received $7.5 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 allow more than 95% of the electricity generated on site to be from renewable biomass sources, and a $40 million renewable energy project at our mill in Bucksport, Maine, which will provide a 43% increase in thermal energy production from renewable biomass.
"Our fourth quarter results have positioned us well from an operating and earnings perspective as we move to an improved coated paper market in 2011,” said Mike Jackson, President and Chief Executive Officer of Verso. “Our operating earnings improved by $22 million compared to the fourth quarter of 2009, and in spite of reduced volume from the seasonably strong third quarter of 2010, our EBITDA was up over 8% sequentially.
''We ended 2010 with the highest liquidity we have had since we started the company, even as we introduced and began to execute and spend against our very aggressive and high-return energy strategy. Our R-gap process continued to mitigate any pressure we felt from raising input costs, and our safety record was at an all-time best. In fact, our lost-time incidence rate of 0.07 put us in the category of world class performance for that type of safety measure.
"At the end of 2010, our annual spending for capital expenditures was at target levels, and our working capital continued at industry best-in-class levels. Operating rates for 2011 are projected by industry sources to be in the 92% to 95% range, which should generate a very favorable supply-demand balance. We are looking forward to a continuing positive trend in all areas of our business."
Verso reported a net loss of $14.0 million in the fourth quarter of 2010, or $0.27 per diluted share, which included $1.0 million of charges from special items, or $0.02 per diluted share, primarily due to costs associated with new product development. Verso had net income of $18.2 million, or $0.35 per diluted share, in the fourth quarter of 2009, which included net benefits of $52.8 million, or $1.01 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 $131.1 million, or $2.50 per diluted share, for the year ended December 31, 2010, which included $4.7 million of charges from special items, or $0.09 per diluted share, primarily due to costs associated with new product development. Verso had net income of $106.0 million, or $2.03 per diluted share, for the year ended December 31, 2009, which included $287.1 million of net benefits, or $5.50 per share, primarily related to alternative fuel mixture tax credits and net gains related to the early retirement of debt.
Verso’s net sales for 2010 increased $244.4 million, or 18.0%, as total sales volume grew 19.7% compared to 2009. Results for the year ended December 31, 2010 included an operating loss of $3.9 million compared to an operating loss of $77.4 million for 2009. Verso’s gross margin was 12.1% in 2010 compared to 8.7% in 2009.
Included in our results for 2009 were $238.9 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 $64.8 million in pre-tax net gains from the early retirement of debt at a discount in 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 Corp.