Verso Paper Reports Improved Third Quarter 2011 Results

Verso Paper Corp. (NYSE:VRS - News ) today reported financial results for the third quarter and nine months ended September 30, 2011. Results for the periods ended September 30, 2011 and 2010 include:

  • Operating income increased 136% to $30.6 million in the third quarter of 2011 from $12.9 million in the third quarter of 2010.
  • Net sales were $456.8 million in the third quarter of 2011 compared to $432.9 million in the third quarter of 2010.
  • Adjusted EBITDA before pro forma effects of profitability program was $64.2 million in the third quarter of 2011, compared to $46.0 million in the third quarter of 2010. (Note: EBITDA and Adjusted EBITDA are non-GAAP financial measures and are defined and reconciled to net income later in this release).
  • Net income before items was $0.8 million in the third quarter of 2011, or $0.01 per diluted share, compared to a net loss before items of $18.6 million, or $0.35 per diluted share in the third quarter of 2010.

Overview

Verso’s net sales for the third quarter of 2011 increased $23.9 million, or 5.5%, compared to the third quarter of 2010, reflecting an 8.0% increase in the average sales price for all of our products while sales volume decreased 2.3% compared to last year’s third quarter. Verso’s gross margin was 17.8% for the third quarter of 2011 compared to 14.1% for the same period in 2010.

"Our third quarter results improved significantly from the third quarter of 2010. In spite of some demand challenges with specific product categories and the cost pressures of raw materials, Verso recognized a solid quarter. Pricing improved significantly as compared to the prior-year period and slightly on a sequential quarter basis. Our operations, as we projected in our second quarter earnings call, continued to improve in the area of material usage,” said Mike Jackson, President and Chief Executive Officer of Verso.

“Our major energy projects continue to advance on our projected timeline, and we expect to start up our energy project at our Quinnesec mill in late November, which will continue to improve our cost position at our largest freesheet facility.

“As many of you know, on October 11, 2011, we announced some capacity closures that are in the best interest of our long-term performance and support our strategy of both lowering our costs and balancing supply with demand.

“Finally, we continue to recognize a correlation between operational performance and safety results. During the quarter, our total incident rate was 0.8, which is a world-class performance. I wish to recognize all of our employees who continue to contribute to this outstanding achievement.”

Verso reported a net loss of $0.3 million in the third quarter of 2011, or $0.01 per diluted share, which included $1.1 million of charges from special items, or $0.02 per diluted share. Verso had a net loss of $19.2 million, or $0.36 per diluted share, in the third quarter of 2010, which included $0.6 million of charges from special items, or $0.01 per diluted share.

Net Sales. Net sales for the third quarter of 2011 increased 5.5% to $456.8 million from $432.9 million in the third quarter of 2010, as the average sales price for all of our products increased 8.0%, while sales volume decreased 2.3% compared to last year’s third quarter. This quarter’s improvement in average sales price includes price increases implemented during 2011.

Net sales for our coated and supercalendered papers segment increased 4.4% in the third quarter of 2011 to $374.5 million from $358.9 million for the same period in 2010, as the average paper sales price per ton increased 10.2% and paper sales volume decreased 5.3% compared to the third quarter of 2010.

Net sales for our market pulp segment decreased 11.3% to $40.4 million in the third quarter of 2011 from $45.4 million for the same period in 2010, reflecting an 11.3% decrease in the average sales price per ton compared to the third quarter of 2010.

Net sales for our other segment increased 46.9% in the third quarter of 2011 to $41.9 million from $28.6 million in the third quarter of 2010. The improvement in net sales reflects a 32.6% increase in sales volume combined with a 10.8% increase in the average sales price per ton compared to the third quarter of 2010.

Cost of sales. Cost of sales, including depreciation, amortization, and depletion, was $406.7 million in the third quarter of 2011 compared to $403.6 million in 2010. Our gross margin, excluding depreciation, amortization, and depletion, improved to 17.8% for the third quarter of 2011 from 14.1% for the third quarter of 2010, reflecting higher average sales prices during the third quarter of 2011. Depreciation, amortization, and depletion expenses were $31.2 million in the third quarter of 2011 compared to $31.7 million in the third quarter of 2010.

Selling, general, and administrative. Selling, general, and administrative expenses increased to $19.5 million in the third quarter of 2011 from $16.4 million for the same period in 2010, primarily due to inflation of personnel related costs.

Interest expense. Interest expense for the third quarter of 2011 was $30.8 million compared to $32.2 million for the same period in 2010.

Based in Memphis, Tennessee, Verso Paper Corp. is a leading North American producer of coated papers, including coated groundwood and coated freesheet, 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