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Verso Paper Corp. Reports Second Quarter 2012 Results

Net sales for our market pulp segment decreased 3.9% to $69.1 million for the six months ended June 30, 2012, from $71.9 million for the same period in 2011. This decrease was due to a 13.3% decline in the average sales price per ton while sales volume increased 10.8% compared to the six months ended June 30, 2011.

Net sales for our other segment increased 17.1% to $83.3 million for the six months ended June 30, 2012, from $71.1 million for the six months ended June 30, 2011. The improvement in 2012 is due to a 21.5% increase in sales volume, reflecting the continued development of new paper product offerings for our customers. The average sales price per ton decreased 3.6% compared to the six months ended June 30, 2011.

Cost of sales. Cost of sales, including depreciation, amortization, and depletion, were $723.7 million for the six months ended June 30, 2012, compared to $754.0 million for the same period last year. Our gross margin, excluding depreciation, amortization, and depletion, was 10.8% for the six months ended June 30, 2012, compared to 15.3% for the six months ended June 30, 2011, reflecting higher average sales prices during 2011. Depreciation, amortization, and depletion expenses were $63.2 million for the six months ended June 30, 2012, compared to $63.0 million for the six months ended June 30, 2011.

Selling, general, and administrative. Selling, general, and administrative expenses were $38.7 million for the six months ended June 30, 2012, compared to $40.3 million for the same period in 2011.

Interest expense. Interest expense for the six months ended June 30, 2012, was $65.4 million compared to $64.0 million for the same period in 2011.

Other loss, net. Other loss, net for the six months ended June 30, 2012, was a net loss of $7.5 million compared to a net loss of $26.1 million for the six months ended June 30, 2011. Included in the results for 2012 and 2011 were losses of $8.2 million and $26.1 million, respectively, related to the early retirement of debt in connection with debt refinancing.

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.

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