Verso Posts Firt Quarter Loss on Lower Pricing, Volumes

"We experienced a seasonally weak first quarter that was a bit slower than normal. . ." – David Paterson, President and CEO, Verso.

May 7, 2014 - Verso Paper Corp. (NYSE: VRS) today reported financial results for the first quarter of 2014. Results for the quarters ended March 31, 2014 and 2013 include:

  • Net sales of $299.1 million in the first quarter of 2014 compared to $333.2 million in the first quarter of 2013.
  • Net loss before items of $69.1 million, or $1.30 per diluted share, in the first quarter of 2014, compared to net loss before items of $41.3 million, or $0.78 per diluted share, in the first quarter of 2013.
  • Adjusted EBITDA before pro forma effects of profitability program of $(7.9) million in the first quarter of 2014, compared to $20.1 million in the first quarter of 2013.

OVERVIEW

Verso's net sales for the first quarter of 2014 decreased $34.1 million, or 10.2%, compared to the first quarter of 2013, reflecting a 1.9% decrease in average sales price per ton and an 8.5% decline in total sales volume. Prices for our pulp segment were higher while coated and other segment prices declined.

Volumes and operating costs were negatively impacted by significant downtime taken during the quarter, weather-related increases to energy, wood, and operating costs as well as a planned capital spending related outage at our Androscoggin mill.

"We experienced a seasonally weak first quarter that was a bit slower than normal as shipments slowed and we took over 38,000 tons of downtime related to market conditions and energy-related curtailments in order to keep our inventories in line with expectations and to help minimize our energy exposure," said David Paterson, President and Chief Executive Officer of Verso. "As we mentioned last quarter, pricing pressure on our coated business remained with us and we experienced weather-related costs in both our operations as well as our input prices.

"As we look to the second quarter, we see improvements in our paper and pulp volumes to levels comparable to last year as well as significantly lower energy prices and improved operating performance. Additionally, we expect to continue to make great progress in the planning and integration phases of the proposed NewPage acquisition. Finally, we have recently entered into an agreement for a $40 million revolving credit facility and continue to evaluate selling non-strategic assets in the future to obtain additional liquidity."

Net Sales. Net sales for the first quarter of 2014 decreased 10.2% to $299.1 million from $333.2 million in the first quarter of 2013, reflecting a 1.9% decrease in average sales price per ton and an 8.5% decline in total sales volume.

Net sales for our coated papers segment decreased 12.9% in the first quarter of 2014 to $218.3 million from $250.5 million for the same period in 2013, due to an 8.7% decrease in paper sales volume and a 4.6% decline in average sales price per ton. The decline in sales volume and price were driven by declining demand for coated papers, increased competition from the global marketplace, and lower production due to record-level energy costs.

Net sales for our market pulp segment decreased 2.7% in the first quarter of 2014 to $36.2 million from $37.2 million for the same period in 2013. The sales volume declined 14.1% while the average sales price per ton increased 13.3% compared to the first quarter of 2013.

Net sales for our other segment decreased 1.9% to $44.6 million in first quarter of 2014 from $45.5 million in the first quarter of 2013. This decrease was driven by a 3.2% decrease in average sales price per ton partially offset by a 1.4% increase in sales volume.

Cost of sales. Cost of sales, including depreciation, amortization, and depletion, was $328.0 million in the first quarter of 2014 compared to $317.8 million in 2013, reflecting the negative impact of over 38,000 tons of downtime related to market conditions and energy-related curtailments as well as decreased productivity associated with a planned capital spending related outage at our Androscoggin mill. Our cost of sales was also unfavorably affected by elevated energy and operating costs driven by severe winter weather conditions. Our gross margin, excluding depreciation, amortization, and depletion, was (1.1)% for the first quarter of 2014 compared to 12.4% for the first quarter of 2013. Depreciation, amortization, and depletion expenses were $25.7 million for the first quarter of 2014 compared to $26.0 million for the first quarter of 2013.

Selling, general, and administrative. Selling, general, and administrative expenses were $17.6 million in the first quarter of 2014 compared to $18.8 million for the first quarter of 2013.

Restructuring charges. Restructuring charges for the first quarter of 2013 were $1.0 million and related to the closure of the former Sartell mill.

Other operating income. Other operating income in first quarter of 2013 was $3.3 million and consisted of the gains on the sales of our former Sartell mill and the assets of Verso Fiber Farm LLC.

Interest expense. Interest expense for the first quarter of 2014 was $34.5 million compared to $34.7 million for the same period in 2013.

Other loss, net. Other loss, net for the first quarter of 2014 was $9.6 million and reflected costs incurred in connection with the merger agreement signed with NewPage Holdings Inc. on January 3, 2014. Other loss, net of $2.6 million for the same period in 2013 reflected losses related to debt refinancing.

Verso Paper is a leading North American producer of coated papers, including coated groundwood and coated freesheet, and specialty products. Verso is headquartered in Memphis, Tennessee, and owns three paper mills located in Maine and Michigan. To learn more please visit: www.versopaper.com.

SOURCE: Verso Paper Corp.