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Overview
Verso's net sales for the second quarter of 2012 decreased
Verso reported a net loss of
"Demand in the coated industry continued to be challenged during the
second quarter of 2012 which resulted in a delay in the announced price
increases during the quarter. This was primarily a result of the
drop-off in advertising spending and slowdowns in the commercial print
area which are impacted by the sluggish GDP growth. However, our coated
groundwood and coated freesheet volumes were relatively flat with last
year's levels and we did a good job of managing our pricing relative to
overall market demand. Adjusted EBITDA was comparable to the first
quarter of this year and slightly better if you exclude the over
"Our company was further challenged during the quarter by the fire and
explosion at our
"We anticipate that coated groundwood prices will gain positive momentum
throughout the third quarter and coated freesheet prices to be stable as
we move into the busier second half of the year. Overall, volumes will
be similar to last year's levels after giving consideration to the
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Summary Results |
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Results of Operations — Comparison of the Second Quarter of 2012 to the Second Quarter of 2011 |
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| Three Months Ended | ||||||||
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| (Dollars in thousands) | 2012 | 2011 | ||||||
| Net sales | $ | 365,262 | $ | 398,779 | ||||
| Costs and expenses: | ||||||||
|
Cost of products sold - (exclusive of depreciation, amortization, and depletion) |
323,185 | 338,480 | ||||||
| Depreciation, amortization, and depletion | 31,777 | 31,645 | ||||||
| Selling, general, and administrative expenses | 19,930 | 21,667 | ||||||
| Restructuring and other charges | (106 | ) | - | |||||
| Total operating expenses | 374,786 | 391,792 | ||||||
| Operating income (loss) | (9,524 | ) | 6,987 | |||||
| Interest income | (2 | ) | (33 | ) | ||||
| Interest expense | 33,228 | 31,552 | ||||||
| Other income, net | (22,077 | ) | (236 | ) | ||||
| Loss before income taxes | (20,673 | ) | (24,296 | ) | ||||
| Income tax expense | 9 | - | ||||||
| Net loss |
|
$ | (20,682 | ) | $ | (24,296 | ) | |
Net Sales. Net sales for the second quarter of 2012 decreased
8.4%, to
Net sales for our coated papers segment decreased 11.1% in the second
quarter of 2012 to
Net sales for our market pulp segment were
Net sales for our other segment increased 5.0% to
Cost of sales. Cost of sales, including depreciation,
amortization, and depletion, was
Selling, general, and administrative. Selling, general, and
administrative expenses were
Interest expense. Interest expense for the second quarter of 2012
was
Other income, net. Other income, net for the second quarter of
2012 was a gain of
|
Results of Operations — Comparison of the First Six Months of 2012 to the First Six Months of 2011 |
||||||||
| Six Months Ended | ||||||||
|
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| (Dollars in thousands) | 2012 | 2011 | ||||||
| Net sales | $ | 740,557 | $ | 815,371 | ||||
| Costs and expenses: | ||||||||
|
Cost of products sold - (exclusive of depreciation, amortization, and depletion) |
660,465 | 691,008 | ||||||
| Depreciation, amortization, and depletion | 63,200 | 62,992 | ||||||
| Selling, general, and administrative expenses | 38,748 | 40,301 | ||||||
| Restructuring and other charges | (21 | ) | - | |||||
| Total operating expenses | 762,392 | 794,301 | ||||||
| Operating income (loss) | (21,835 | ) | 21,070 | |||||
| Interest income | (4 | ) | (67 | ) | ||||
| Interest expense | 65,347 | 63,941 | ||||||
| Other loss, net | 7,493 | 26,091 | ||||||
| Loss before income taxes | (94,671 | ) | (68,895 | ) | ||||
| Income tax benefit | (60 | ) | (2 | ) | ||||
| Net loss | $ | (94,611 | ) | $ | (68,893 | ) | ||
Net Sales. Net sales for the six months ended
Net sales for our coated papers segment decreased 12.5% to
Net sales for our market pulp segment decreased 3.9% to
Net sales for our other segment increased 17.1% to
Cost of sales. Cost of sales, including depreciation,
amortization, and depletion, were
Selling, general, and administrative. Selling, general, and
administrative expenses were
Interest expense. Interest expense for the six months ended
Other loss, net. Other loss, net for the six months ended
Reconciliation of Net Income to Adjusted EBITDA
The agreements governing our debt contain financial and other restrictive covenants that limit our ability to take certain actions, such as incurring additional debt or making acquisitions. Although we do not expect to violate any of the provisions in the agreements governing our outstanding indebtedness, these covenants can result in limiting our long-term growth prospects by hindering our ability to incur future indebtedness or grow through acquisitions.
EBITDA consists of earnings before interest, taxes, depreciation, and amortization. EBITDA is a measure commonly used in our industry, and we present EBITDA to enhance your understanding of our operating performance. We use EBITDA as a way of evaluating our performance relative to that of our peers. We believe that EBITDA is an operating performance measure, and not a liquidity measure, that provides investors and analysts with a measure of operating results unaffected by differences in capital structures, capital investment cycles, and ages of related assets among otherwise comparable companies. Adjusted EBITDA is EBITDA further adjusted to exclude unusual items and other pro forma adjustments permitted in calculating covenant compliance in the indentures governing our debt securities to test the permissibility of certain types of transactions. Adjusted EBITDA is modified to align the mark-to-market impact of derivative contracts used to economically hedge a portion of future natural gas purchases with the period in which the contracts settle and is modified to reflect the amount of net cost savings projected to be realized as a result of specified activities taken during the preceding 12-month period. We believe that the supplemental adjustments applied in calculating Adjusted EBITDA are reasonable and appropriate to provide additional information to investors. We also believe that Adjusted EBITDA is a useful liquidity measurement tool for assessing our ability to meet our future debt service, capital expenditures, and working capital requirements.
However, EBITDA and Adjusted EBITDA are not measurements of financial performance under U.S. GAAP, and our EBITDA and Adjusted EBITDA may not be comparable to similarly titled measures of other companies. You should not consider our EBITDA or Adjusted EBITDA as an alternative to operating or net income, determined in accordance with U.S. GAAP, as an indicator of our operating performance, or as an alternative to cash flows from operating activities, determined in accordance with U.S. GAAP, as an indicator of our cash flows or as a measure of liquidity. The following table reconciles net loss to EBITDA and Adjusted EBITDA for the periods presented.
| Six | Three | Six | Twelve | |||||||||||||||||||||
| Months | Year | Months | Months | Months | ||||||||||||||||||||
| Ended | Ended | Ended | Ended | Ended | ||||||||||||||||||||
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| (Dollars in millions) | 2011 | 2011 | 2012 | 2012 | 2012 | |||||||||||||||||||
| Net loss | $ | (68.9 | ) | $ | (137.1 | ) | $ | (20.7 | ) | $ | (94.6 | ) | $ | (162.8 | ) | |||||||||
| Income tax expense | - | 0.2 | - | (0.1 | ) | 0.1 | ||||||||||||||||||
| Interest expense, net | 63.9 | 126.5 | 33.3 | 65.4 | 128.0 | |||||||||||||||||||
|
Depreciation, amortization, and depletion |
63.0 | 125.3 | 31.8 | 63.2 | 125.5 | |||||||||||||||||||
| EBITDA | 58.0 | 114.9 | 44.4 | 33.9 | 90.8 | |||||||||||||||||||
| Adjustments to EBITDA: | ||||||||||||||||||||||||
|
Loss (gain) on early extinguishment of debt, net(1) |
26.1 | 26.1 | (21.8 | ) | 8.2 | 8.2 | ||||||||||||||||||
| Goodwill impairment(2) | - | 18.7 | - | - | 18.7 | |||||||||||||||||||
| Restructuring and other charges(3) | - | 24.5 | (0.1 | ) | - | 24.5 | ||||||||||||||||||
| Hedge losses(4) | - | 7.5 | (4.6 | ) | 0.1 | 7.6 | ||||||||||||||||||
| Equity award expense(5) | 1.3 | 2.4 | 1.0 | 1.6 | 2.7 | |||||||||||||||||||
| Other items, net(6) | 5.2 | 8.4 | 4.6 | 5.0 | 8.2 | |||||||||||||||||||
|
Adjusted EBITDA before pro forma effects of profitability program |
90.6 | 202.5 | 23.5 | 48.8 | 160.7 | |||||||||||||||||||
|
Pro forma effects of profitability program(7) |
46.8 | |||||||||||||||||||||||
| Adjusted EBITDA | $ | 207.5 | ||||||||||||||||||||||
| (1)Represents net loss related to debt refinancing. | ||||||||||||||||||||||||
| (2)Represents impairment of goodwill allocated to the coated paper segment. | ||||||||||||||||||||||||
| (3)Represents costs associated with the shutdown of three paper machines. | ||||||||||||||||||||||||
| (4)Represents unrealized losses on energy-related derivative contracts. | ||||||||||||||||||||||||
| (5)Represents amortization of non-cash incentive compensation. | ||||||||||||||||||||||||
| (6)Represents miscellaneous non-cash and other non-recurring earnings adjustments. | ||||||||||||||||||||||||
| (7)Represents cost savings expected to be realized as part of our cost savings program. | ||||||||||||||||||||||||
Forward-Looking Statements
In this press release, all statements that are not purely historical
facts are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934. Forward-looking statements may be identified by the words
"believe," "expect," "anticipate," "project," "plan," "estimate,"
"intend," and similar expressions. Forward-looking statements are based
on currently available business, economic, financial, and other
information and reflect management's current beliefs, expectations, and
views with respect to future developments and their potential effects on
Verso. Actual results could vary materially depending on risks and
uncertainties that may affect Verso and its business. For a discussion
of such risks and uncertainties, please refer to Verso's filings with
the
About Verso
Based in
Conference Call
Verso will host a conference call today at
A telephonic replay of the conference call can be accessed at
719-457-0820 or, within the U.S. and
Senior Vice
President and
Chief Financial Officer
robert.mundy@versopaper.com
www.versopaper.com
Source:
News Provided by Acquire Media
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