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Verso Paper Reports Price Increases Produce Smaller Net Loss

May 9, 2011
MEMPHIS, TN—May 09, 2011—Verso Paper reported financial results for the first quarter of 2011. Highlights of its results for the quarters ended March 31 include:

• Net sales increased 14.6 percent to $416.6 million in 2011 from $363.6 million in 2010.

• Operating income of $14.1 million in 2011 compared to an operating loss of $21.5 million in 2010.

• Net loss before items of $18.1 million in 2011, compared to a net loss before items of $52.0 million in 2010.

Overview

Verso’s net sales for the first quarter of 2011 increased $53.0 million, or 14.6 percent, as the average sales price for all of its products increased 13.3 percent compared to the first quarter of 2010 and increased 2.5 percent compared to the fourth quarter of 2010.

The improvement in the company’s average sales price reflects price increases that went into effect during 2010. Verso announced additional price increases for its core products of $40 per ton effective April 1, 2011.

The company’s gross margin was 15.4 percent for the first quarter of 2011 compared to 7.4 percent for the same period in 2010 and 17.2 percent for the fourth quarter of 2010. Sales volume was stable on both a sequential quarter basis and year over year.

Verso reported a net loss of $44.6 million in the first quarter of 2011, which included $26.5 million of charges from special items primarily due to $26.1 million in pre-tax net losses related to the early retirement of debt in connection with our debt refinancing. It had a net loss of $53.6 million in the first quarter of 2010, which included $1.6 million of charges from special items primarily due to costs associated with new product development.

“Our first quarter adjusted EBITDA results improved $34 million compared to the first quarter of 2010. Normally, the first and second quarters are seasonally slow quarters for coated papers, so we view our first quarter results as very positive,” said Mike Jackson, president andCEO of Verso. “Prices continued to improve in the first quarter, consistent with our expectations. We also announced a price increase of $40 per ton, effective April 1 for all of our core products.

“All of our announced energy projects are on schedule, and, as previously mentioned, we expect a positive EBITDA impact of $50 million per year, beginning in the fourth quarter of 2012.

“During the quarter, we also focused on our capital structure by refinancing our second priority senior secured notes due 2014 and a portion of our first priority senior secured notes due 2014 with new second priority senior secured notes, which extended our maturity date to 2019 and reduced our interest expense.”
 

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