Verso Paper Reports Price Increases Produce Smaller Net Loss
MEMPHIS, TN—May 09, 2011—Verso Paper reported financial results for the first quarter of 2011. Highlights of its results for the quarters ended March 31 include:
• Net sales increased 14.6 percent to $416.6 million in 2011 from $363.6 million in 2010.
• Operating income of $14.1 million in 2011 compared to an operating loss of $21.5 million in 2010.
• Net loss before items of $18.1 million in 2011, compared to a net loss before items of $52.0 million in 2010.
Overview
Verso’s net sales for the first quarter of 2011 increased $53.0 million, or 14.6 percent, as the average sales price for all of its products increased 13.3 percent compared to the first quarter of 2010 and increased 2.5 percent compared to the fourth quarter of 2010.
The improvement in the company’s average sales price reflects price increases that went into effect during 2010. Verso announced additional price increases for its core products of $40 per ton effective April 1, 2011.
The company’s gross margin was 15.4 percent for the first quarter of 2011 compared to 7.4 percent for the same period in 2010 and 17.2 percent for the fourth quarter of 2010. Sales volume was stable on both a sequential quarter basis and year over year.
Verso reported a net loss of $44.6 million in the first quarter of 2011, which included $26.5 million of charges from special items primarily due to $26.1 million in pre-tax net losses related to the early retirement of debt in connection with our debt refinancing. It had a net loss of $53.6 million in the first quarter of 2010, which included $1.6 million of charges from special items primarily due to costs associated with new product development.
“Our first quarter adjusted EBITDA results improved $34 million compared to the first quarter of 2010. Normally, the first and second quarters are seasonally slow quarters for coated papers, so we view our first quarter results as very positive,” said Mike Jackson, president andCEO of Verso. “Prices continued to improve in the first quarter, consistent with our expectations. We also announced a price increase of $40 per ton, effective April 1 for all of our core products.
“All of our announced energy projects are on schedule, and, as previously mentioned, we expect a positive EBITDA impact of $50 million per year, beginning in the fourth quarter of 2012.
“During the quarter, we also focused on our capital structure by refinancing our second priority senior secured notes due 2014 and a portion of our first priority senior secured notes due 2014 with new second priority senior secured notes, which extended our maturity date to 2019 and reduced our interest expense.”
Net sales for the first quarter of 2011 increased 14.6 percent to $416.6 million from $363.6 million in the first quarter of 2010, as the average sales price for all of our products increased 13.3 percent, reflecting price increases implemented during 2010 as the economy began to recover and demand for our products improved. Total sales volume grew 1.1 percent compared to the first quarter of 2010.
Net sales for the coated and supercalendered papers segment increased 16.2 percent in the first quarter of 2011 to $351.7 million from $302.8 million for the same period in 2010, due to a 13.0 percent increase in the average paper sales price per ton combined with a 2.8 percent increase in paper sales volume.
Net sales for the market pulp segment decreased 4.5 percent to $35.7 million in the first quarter of 2011 from $37.4 million for the same period in 2010. This decline reflects an 11.5 percent decrease in sales volume, which was largely offset by an increase of 7.9 percent in the average sales price per ton compared to the first quarter of 2010.
Net sales for the “other” segment increased 24.4 percent to $29.2 million in the first quarter of 2011 from $23.4 million in the first quarter of 2010. The improvement in 2011 was due to a 15.1 percent increase in the average sales price per ton combined with an increase of 8.0 percent in sales volume, reflecting the continued development of new paper product offerings for our customers.
Cost of sales, including depreciation, amortization, and depletion, was $383.9 million in the first quarter of 2011 compared to $368.9 million in 2010. Our gross margin, excluding depreciation, amortization, and depletion, improved to 15.4 percent for the first quarter of 2011 from 7.4 percent for the first quarter of 2010, reflecting higher average sales prices during the first quarter of 2011. Depreciation, amortization, and depletion expenses were $31.4 million in the first quarter of 2011 compared to $32.1 million in the first quarter of 2010.
Selling, general, and administrative expenses were $18.6 million in the first quarter of 2011 compared to $16.2 million for the same period in 2010, primarily due to inflation of personnel related costs.
Interest expense for the first quarter of 2011 was $32.4 million compared to $32.3 million for the same period in 2010.
Other, net for the first quarter of 2011 was a net loss of $26.3 million compared to a net gain of $0.2 million for the first quarter of 2010. Included in the results for 2011 were $26.1 million in pre-tax net losses related to the early retirement of debt in connection with our debt refinancing.
About Verso
Based in Memphis, TN, 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. Additional information about Verso is available on the Company’s website at www.versopaper.com.
Source: financial release.
