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» Verso Paper CEO Discusses Q2 2011 Results - Earnings Call Transcript
Dave PatersonGood morning, and thank you for being on this morning's call. Let me start by covering our decision to permanently shut down and close our paper mill in Sartell, Minnesota. As you are aware, we experienced a tragic fire and explosion at the Sartell Mill on May 28. Since that time we've been evaluating the causes of the accident and our future course of action concerning the mill. We announced last week to the public, our employees and state and local officials, our decision not to rebuild the mill. Our decision is based upon our view of future demand for the products reduced in Sartell, and the mill's ability to be profitable after a setback of this magnitude and duration. We are working to complete an orderly closure of the facility and are committed to work with the state and Sartell community to find alternative uses for the site. Turning to the second quarter we clearly saw a slowing and general sluggishness, across our market segments. While our coated freesheet and coated groundwood volumes, we're in line with our expectations and last year's performance, pricing was disappointing. The paper price increases announced during the quarter were either delayed or put on hold depending on the grade and market. During the quarter, we completed major maintenance outages at our Androscoggin and Bucksport mills resulting in a $5 million hit on operating costs quarter over quarter. While we saw moderation in our input costs, the general lack of momentum in the economy resulted in a disappointing quarter for Verso. Finally, during the quarter we completed several capital refinancing transactions that cumulatively extended the average maturity of our debt 2.5 years to March of 2018. Let me turn it back over to Bob at this point. Robert Mundy Thanks, Dave. Turning to slide 4, our overall volume for the quarter was about 14,000 tons below last year's levels. However, last year's volumes included 26,000 tons of supercalendered products that we no longer manufacture after the shutdown of two SC machines at Sartell in the fourth quarter of 2011.
The 9000 ton drop between the first and second quarters of this year, is impacted by the damage to inventory that was stored at our Sartell Mill at the time of the fire. Revenues compared to last year's first quarter, last year's second quarter are down due to the volumes I just mentioned as well as lower pulp in coated prices.Versus the first quarter of this year, the $10 million drop in revenue was primarily due to the volume changes as the prices were down less than 1%. Turning to slide 5, as Dave mentioned, coated volumes were about flat of last year's levels we are showing these volumes excluding supercalendered products, as we will no longer have these products in our offerings as a result of the Sartell mill closure. Coated prices were off about 5% from last year's levels and less than 1% from the first quarter of this year, good pulp volumes for the quarter, there's a another (Inaudible) increase from last year's levels that are result of our scheduled maintenance outage that we took last year. Pulp prices were up almost $30 a ton from the first quarter. Now turning to slide 6, you can see the key changes between our second quarter 2012, adjusted EBITDA of $23 million, versus the $25 million in the first quarter of this year. And slightly lower volume versus the first quarter, had virtually no impact on EBITDA and price being slightly lower had a negative impact of about $1 million. Scheduled maintenance outages performed during the quarter, were completed on time and on budget, with a negative impact of $5 million versus the first quarter. Operations improvements contributed a positive $3 million and input prices in total were just slightly unfavorable versus the first quarter. Read the rest of this transcript for free on seekingalpha.com