Verso Paper First Quarter Loss Narrows on Improving Pulp, Specialty Papers Business

May 9, 2013 - Verso Paper Corp. today reported financial results for the first quarter of 2013. Results for the quarters ended March 31, 2013 and 2012 include:

  • Operating loss of $1.1 million in the first quarter of 2013, compared to operating loss of $12.3 million in the first quarter of 2012.
  • Net loss of $38.4 million in the first quarter of 2013, or $0.72 per diluted share, compared to net loss of $73.9 million, or $1.40 per diluted share, in the first quarter of 2012.
  • EBITDA of $22.3 million in the first quarter of 2013, compared to ($10.5) million in the first quarter of 2012, and Adjusted EBITDA before pro forma effects of profitability program of $20.1 million in the first quarter of 2013, compared to $25.3 million in the first quarter of 2012 (Note: Adjusted EBITDA is a non-GAAP financial measure and is defined and reconciled to net income later in this release).

OVERVIEW

Verso’s net sales for the first quarter of 2013 decreased $42.1 million, or 11.2%, compared to the first quarter of 2012, reflecting an 11.2% decline in total sales volume, which was driven by the closure of the Sartell mill in the third quarter of 2012. The average sales price per ton was consistent with the same period in the prior year. Verso’s gross margin was 12.4% for the first quarter of 2013 compared to 10.1% for the first quarter of 2012.

Verso reported net loss of $38.4 million in the first quarter of 2013, or $0.72 per diluted share, which included $2.9 million of net gains from special items, or $0.05 per diluted share, primarily due to unrealized gains on energy-related derivative contracts and gains on the sale of our Sartell mill and Fiber Farm LLC. Verso had a net loss of $73.9 million, or $1.40 per diluted share, in the first quarter of 2012, which included $34.9 million of charges from special items, or $0.66 per diluted share.

“We experienced our normal seasonally weak first quarter as shipments slowed and our inventories increased in line with expectations; however pricing overall was flat sequentially," said David Paterson, President and Chief Executive Officer of Verso. “We are encouraged by the improvement in pricing and volumes in our pulp and specialty paper businesses on a year over year basis. Pricing in our printing and writing grades remained flat year over year while volumes declined primarily due to the closure of our Sartell mill during the third quarter of 2012. Our ‘R Gap’ process continued to deliver significant cost reductions across our manufacturing platform.

“One area of concern remains the delivered cost of natural gas to our two facilities in Maine. While the price of natural gas increased slightly year over year, we saw delivery charges surge primarily due to constraints in the New England delivery network during this period of higher demand. On a year over basis we experienced a negative impact of almost $22 million relative to the gas cost at our Maine facilities.

“As we look to the balance of the year, we see continued improvements in our pulp and specialty papers business in conjunction with a normal seasonal pick-up in the printing and writing papers business.”

Net Sales. Net sales for the first quarter of 2013 decreased 11.2% to $333.2 million from $375.3 million in the first quarter of 2012, due to an 11.2% decline in total sales volume over the first quarter of 2012, which was driven by the closure of the Sartell mill in the third quarter of 2012. The average sales price per ton was flat compared to the same period in the prior year.

Net sales for our coated papers segment decreased 17.4% in the first quarter of 2013 to $250.5 million from $303.2 million for the same period in 2012, due to a 17.1% decrease in paper sales volume, which was driven by the closure of the Sartell mill. The average sales price per ton of coated paper was flat compared to the same period last year.

Net sales for our market pulp segment increased 13.3% in the first quarter of 2013 to $37.2 million from $32.9 million for the same period in 2012. The sales volume increased 8.7% while the average sales price per ton increased 4.2% compared to the first quarter of 2012.

Net sales for our other segment increased 16.0% to $45.5 million in first quarter of 2013 from $39.2 million in the first quarter of 2012. This increase was driven by a 7.4% increase in sales volume and an 8.0% increase in average sales price per ton.

Cost of sales. Cost of sales, including depreciation, amortization, and depletion, was $317.8 million in the first quarter of 2013 compared to $368.7 million in 2012, reflecting the closure of the Sartell mill in the third quarter of 2012. Our gross margin, excluding depreciation, amortization, and depletion, was 12.4% for the first quarter of 2013 compared to 10.1% for the first quarter of 2012. Depreciation, amortization, and depletion expenses were $26.0 million for the first quarter of 2013 compared to $31.4 million for the first quarter of 2012.

Selling, general, and administrative. Selling, general, and administrative expenses were $18.8 million in the first quarter of 2013 and 2012.

Restructuring charges. Restructuring charges for the first quarter of 2013 were $1.0 million, and consisted primarily of facility operations and personnel costs for the Sartell mill site through the date of sale. Restructuring charges were $0.1 million for the first quarter of 2012.

Other operating income. Other operating income for the first quarter of 2013 was $3.3 million and consisted of the gain on the sales of our Sartell mill and Fiber Farm LLC.

Interest expense. Interest expense for the first quarter of 2013 was $34.7 million compared to $32.1 million for the same period in 2012.

Other loss, net. Other loss, net was $2.6 million in the first quarter of 2013 compared to $29.6 million in the first quarter of 2012, primarily attributable to losses related to debt refinancing.

Based in Memphis, Tennessee, Verso Paper Corp. is a leading North American producer of coated papers, including coated groundwood and coated freesheet, and specialty paper 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. Additional information about Verso is available on the Company’s website at www.versopaper.com.

SOURCE: Verso Paper Corp.