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TheStreet Open House

Verso Paper Corp. Reports Second Quarter 2012 Results

Net sales for our market pulp segment were $36.2 million in both the second quarter of 2012 and 2011. The average sales price per ton decreased 11.9% while sales volume increased 13.7% compared to the second quarter of 2011.

Net sales for our other segment increased 5.0% to $44.1 million in the second quarter of 2012 from $41.9 million in the second quarter of 2011. The improvement in 2012 was due to a 12.7% increase in sales volume, reflecting the continued development of new paper product offerings for our customers. The average sales price per ton decreased 6.8%.

Cost of sales. Cost of sales, including depreciation, amortization, and depletion, was $355.0 million in the second quarter of 2012 compared to $370.1 million in 2011. Our gross margin, excluding depreciation, amortization, and depletion, was 11.5% for the second quarter of 2012 compared to 15.1% for the second quarter of 2011, reflecting higher average sales prices during 2011. Depreciation, amortization, and depletion expenses were $31.8 million for the second quarter of 2012 compared to $31.6 million for the second quarter of 2011.

Selling, general, and administrative. Selling, general, and administrative expenses were $19.9 million in the second quarter of 2012 compared to $21.7 million for the same period in 2011.

Interest expense. Interest expense for the second quarter of 2012 was $33.3 million compared to $31.6 million for the same period in 2011.

Other income, net. Other income, net for the second quarter of 2012 was a gain of $22.1 million compared to a gain of $0.2 million for the second quarter of 2011. Included in the results for the second quarter of 2012 were gains of $21.8 million related to the early retirement of debt in connection with debt refinancing.

 

Results of Operations – Comparison of the First Six Months of 2012 to the First Six Months of 2011

 
  Six Months Ended
June 30,
(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 June 30, 2012, decreased 9.2% to $740.6 million from $815.4 million for the six months ended June 30, 2011, reflecting a 5.7% decrease in total sales volume, which was driven by the shutdown of three paper machines late last year. Additionally, the average sales price for all of our products decreased 3.7%, led by a decline in the price of pulp.

Net sales for our coated papers segment decreased 12.5% to $588.2 million for the six months ended June 30, 2012, from $672.4 million for the six months ended June 30, 2011. This change reflects an 11.0% decrease in paper sales volume, which was driven by the shutdown of three paper machines late last year, combined with a 1.8% decrease in the average coated paper sales price per ton compared to the same period last year.

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