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Verso Paper Corp. Reports Fourth Quarter And Year-End 2011 Results

Stocks in this article: VRS

Net sales for our market pulp segment decreased 6.6% to $37.8 million in the fourth quarter of 2011 from $40.5 million for the same period in 2010, reflecting an 11.0% decrease in the average sales price per ton compared to the fourth quarter of 2010. This decrease was partially offset by a 5.0% increase in sales volume in the fourth quarter of 2011.

Net sales for our other segment increased 31.9% to $40.6 million in the fourth quarter of 2011 from $30.7 million in the fourth quarter of 2010. The improvement in 2011 was due to a 19.3% increase in sales volume combined with a 10.6% increase in the average sales price per ton compared to the fourth quarter of 2010.

Cost of sales. Cost of sales, including depreciation, amortization, and depletion, was $424.9 million in the fourth quarter of 2011 compared to $368.5 million in 2010. Our gross margin, excluding depreciation, amortization, and depletion, was 12.6% for the fourth quarter of 2011 compared to 17.2% for the fourth quarter of 2010. Adjusted for the negative impact of de-designating certain hedges in the fourth quarter of 2011, our gross margin would have been 14.2%. Depreciation, amortization, and depletion expenses were $31.1 million in the fourth quarter of 2011 compared to $30.8 million in the fourth quarter of 2010.

Selling, general, and administrative. Selling, general, and administrative expenses were $18.2 million in the fourth quarter of 2011 compared to $21.8 million for the same period in 2010, mainly due to lower personnel related costs.

Goodwill impairment. Results for the fourth quarter of 2011 included a goodwill impairment charge of $18.7 million, which represents a write-off of the full balance of goodwill.

Restructuring and other charges. Restructuring and other charges of $24.5 million in the fourth quarter of 2011 reflect the permanent shut down of the No. 2 coated groundwood paper machine at our mill in Bucksport, Maine, and two supercalendered paper machines at our mill in Sartell, Minnesota. These charges include $15.0 million of severance and benefit costs, $7.1 million of accelerated depreciation, and $2.3 million due to write-off of spare parts and inventory.

Interest expense. Interest expense for the fourth quarter of 2011 was $31.8 million compared to $31.7 million for the same period in 2010.

Results of Operations – Comparison of 2011 to 2010

    Year Ended December 31,
(Dollars in thousands)     2011   2010
Net sales $ 1,722,489   $ 1,605,316
Costs and expenses:
Cost of products sold - (exclusive of depreciation,
amortization, and depletion) 1,460,290 1,410,770
Depreciation, amortization, and depletion 125,295 127,367
Selling, general, and administrative expenses 78,059 71,043
Goodwill impairment 18,695 -
Restructuring and other charges       24,464       -  
Total operating expenses       1,706,803       1,609,180  
Operating income (loss)       15,686       (3,864 )
Interest income (99 ) (120 )
Interest expense 126,607 128,077
Other loss (income), net       26,042       (884 )
Loss before income taxes (136,864 ) (130,937 )
Income tax expense       197       145  
Net loss     $ (137,061 )   $ (131,082 )

Net Sales. Net sales for 2011 increased 7.3% to $1,722.5 million from $1,605.3 million, as the average sales price for all of our products increased 9.4%, reflecting price increases implemented during 2010 and at the beginning of the second quarter of 2011. This positive impact was partially offset by a 2.0% decline in total sales volume during the year ended December 31, 2011, compared to the year ended December 31, 2010.

Net sales for our coated and supercalendered papers segment increased 7.9% to $1,418.8 million in 2011 from $1,315.0 million in 2010. This improvement reflects a 10.7% in the average paper sales price per ton in 2011 while paper sales volume decreased 2.5% compared to 2010.

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