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Verso Paper Corp. Reports Third Quarter 2012 Results

Net sales for our market pulp segment decreased 13.1% in the third quarter of 2012 to $35.1 million from $40.4 million for the same period in 2011. The average sales price per ton decreased 11.0% while sales volume decreased 2.3% compared to the third quarter of 2011.

Net sales for our other segment decreased 11.7% to $37.0 million in the third quarter of 2012 from $41.9 million in the third quarter of 2011. This decrease was due to an 11.5% decrease in sales volume, while the sales price per ton remained flat.

Cost of sales. Cost of sales, including depreciation, amortization, and depletion, was $329.9 million in the third quarter of 2012 compared to $406.7 million in 2011, reflecting realized cost reduction from the shutdown of three paper machines late last year and the closure of the Sartell mill in the third quarter of this year. Our gross margin, excluding depreciation, amortization, and depletion, was 19.1% for the third quarter of 2012 compared to 17.8% for the third quarter of 2011. Depreciation, amortization, and depletion expenses were $28.1 million for the third quarter of 2012 compared to $31.2 million for the third quarter of 2011.

Selling, general, and administrative. Selling, general, and administrative expenses were $17.6 million in the third quarter of 2012 compared to $19.5 million for the same period in 2011, primarily driven by a decrease in personnel costs.

Restructuring and other charges. Restructuring and other charges for the third quarter of 2012 was $97.0 million, and consisted primarily of fixed asset and other impairment charges of $75.8 million and severance and benefit costs of $16.3 million related to the closure of the Sartell mill.

Interest expense. Interest expense for the third quarter of 2012 was $33.2 million compared to $30.8 million for the same period in 2011.

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

      Nine Months Ended
September 30,
(Dollars in thousands)   2012   2011
Net sales $ 1,113,561  

$

1,272,207

Costs and expenses:

Cost of products sold - (exclusive of depreciation, amortization, and depletion)

962,298 1,066,562
Depreciation, amortization, and depletion 91,338 94,182
Selling, general, and administrative expenses 56,247 59,791
Restructuring and other charges     96,997       -  
Total operating expenses     1,206,880       1,220,535  
Operating income (loss)     (93,319 )     51,672  
Interest income (7 ) (79 )
Interest expense 98,631 94,800
Other loss, net     7,472       26,047  
Loss before income taxes (199,415 ) (69,096 )
Income tax (benefit) expense     (105 )     144  
Net loss   $ (199,310 )   $ (69,240 )
 

Net Sales. Net sales for the nine months ended September 30, 2012, decreased 12.5% to $1,113.6 million from $1,272.2 million for the nine months ended September 30, 2011, reflecting an 8.9% decrease in total sales volume, which was driven by the shutdown of three paper machines late last year and the closure of the Sartell mill in the third quarter of this year. Additionally, the average sales price for all of our products decreased 3.8%, led by a decline in the price of pulp.

Net sales for our coated papers segment decreased 15.1% to $889.1 million for the nine months ended September 30, 2012, from $1,046.9 million for the nine months ended September 30, 2011. This change reflects a 13.2% decrease in paper sales volume, which was driven by the shutdown of three paper machines late last year and the closure of the Sartell mill in the third quarter of this year. The average sales price per ton of coated paper decreased 2.1% compared to the same period last year.

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