Verso Paper Reports Second Quarter Loss

Aug. 8, 2013 - Verso Paper Corp. (NYSE: VRS) today reported financial results for the second quarter and six months ended June 30, 2013. Results for quarters ended June 30, 2013 and 2012 include:

  • Operating loss of $8.5 million in the second quarter of 2013, compared to operating loss of $9.5 million in the second quarter of 2012, and operating loss of $9.6 million in the first half of 2013, compared to operating loss of $21.8 million in the first half of 2012.
  • Net loss before items of $39.2 million, or $0.74 per diluted share, in the second quarter of 2013, compared to net loss before items of $43.1 million, or $0.81 per diluted share, in the second quarter of 2012.
  • Adjusted EBITDA before pro forma effects of profitability program of $22.2 million in the second quarter of 2013, compared to $23.5 million in the second 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 second quarter of 2013 decreased $34.9 million, or 9.5%, compared to the second quarter of 2012, reflecting a 10.4% 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 increased slightly over the same period in the prior year driven by higher sales prices for our pulp and other segments, while coated prices remained flat. Verso’s gross margin was 11.0% for the second quarter of 2013 compared to 11.5% for the second quarter of 2012.

Verso reported a net loss before special items of $39.2 million in the second quarter of 2013, or $0.74 per diluted share, excluding special items of $3.8 million, or $0.07 per diluted share, primarily related to unrealized losses on energy-related derivative contracts. Verso had a net loss before special items of $43.1 million, or $0.81 per diluted share, in the second quarter of 2012, which excluded $22.4 million of net benefits from special items, or $0.42 per diluted share, primarily due to gains on early debt extinguishment.

“During the second quarter we saw the continuation of improved pricing in our pulp and specialty papers segments," said David Paterson, President and Chief Executive Officer of Verso. “In combination with strong volumes, we continue to expect a strong year in both of these segments. In our coated paper segment, prices have been stable for the first half of the year and we are seeing price improvements as we enter the third quarter. Coated paper volumes declined during the first half of the year, reflecting the closure of our Sartell, Minnesota mill in the third quarter of 2012. Our ‘R-Gap’ benchmarking and improvement process continues to deliver solid cost reductions across our operations platform.

“Last quarter we discussed the natural gas situation affecting our facilities in Maine. While the price of natural gas has remained stable, we continue to see upward pressure on the longer term delivery and other charges associated with obtaining natural gas at our Maine facilities. We continue to prepare for next winter in an effort to mitigate any recurrence of the record spikes in natural gas delivery charges that we experienced last year.”

SUMMARY RESULTS

Results of Operations – Comparison of the Second Quarter of 2013 to the Second Quarter of 2012

Net Sales. Net sales for the second quarter of 2013 decreased 9.5% to $330.4 million from $365.3 million in the second quarter of 2012, due to a 10.4% decline in total sales volume over the second 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 increased 1.0% compared to the same period in the prior year.

Net sales for our coated papers segment decreased 11.2% in the second quarter of 2013 to $253.1 million from $285.0 million for the same period in 2012, due to a 10.7% 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 5.2% in the second quarter of 2013 to $38.2 million from $36.2 million for the same period in 2012. The sales volume declined 1.9% while the average sales price per ton increased 7.3% compared to the second quarter of 2012.

Net sales for our other segment decreased 11.0% to $39.1 million in second quarter of 2013 from $44.1 million in the second quarter of 2012. This decrease was driven by a 20.7% decline in sales volume which was partially offset by a 12.3% increase in average sales price per ton.

Cost of sales. Cost of sales, including depreciation, amortization, and depletion, was $320.2 million in the second quarter of 2013 compared to $355.0 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 11.0% for the second quarter of 2013 compared to 11.5% for the second quarter of 2012. Depreciation, amortization, and depletion expenses were $26.3 million for the second quarter of 2013 compared to $31.8 million for the second quarter of 2012.

Selling, general, and administrative. Selling, general, and administrative expenses were $19.2 million in the second quarter of 2013 compared to $19.9 million for the second quarter of 2012.

Other operating income. Other operating income for the second quarter of 2013 was $0.7 million and consisted primarily of gains on Fiber Farm LLC land sales.

Interest expense. Interest expense for the second quarter of 2013 was $34.4 million compared to $33.3 million for the same period in 2012.

Other loss (income), net. Other loss, net was $0.1 million in the second quarter of 2013 compared to income of $22.1 million in the second quarter of 2012, primarily attributable to losses related to debt refinancing in 2013 and gains on early extinguishment of debt in 2012.

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.