Business News
NewPage Announces Third Quarter 2009 Financial Results
Wednesday 11. November 2009 - NewPage Corporation (NewPage) today announced its results of operations for the third quarter of 2009. Net sales were $791 million in the third quarter of 2009 compared to $1,126 million in the third quarter of 2008, a decrease of $335 million, or 30%.
The decrease in net sales reflects lower sales volumes and lower average prices in the third quarter of 2009 compared to the third quarter of 2008. Net loss attributable to NewPage was $(138) million in the third quarter of 2009, primarily as a result of a charge of $133 million on the refinancing of debt and related transactions. The net loss attributable to NewPage for the third quarter of 2008 was $(61) million. Debt covenant EBITDA (earnings before interest, taxes, depreciation and amortization) was $119 million for the third quarter of 2009 compared to $151 million for the third quarter of 2008. The difference is primarily a result of lower sales volumes and lower average sales prices, partially offset by the benefit of alternative fuel mixture tax credits, reduction in raw material costs and substantial on-going cost productivity.
(Logo: http://www.newscom.com/cgi-bin/prnh/20080514/NEWPAGELOGO )
On the challenging economic conditions, Richard D. Willett, Jr., NewPage President and Chief Executive Officer, stated, “The decline in demand for coated paper during the third quarter of 2009, in comparison to the third quarter of 2008, was primarily the result of decreased advertising spending and magazine and catalog circulation, and was largely a continuation of the same macroeconomic forces we saw in the first half of the year, exacerbated by increased low-priced imports from China and Indonesia. Since February of 2009, we’ve seen volume trending upward in our business, primarily as customer de-stocking of their on-hand inventory ceases. Today, we are experiencing seasonal strengthening and some benefits of the postal service’s volume incentives for catalogers. We believe as the U.S. economy recovers, so will our paper volume. To ensure that we participate in that recovery on a level playing field, we have filed new trade cases to address the growth of unfairly traded coated sheet products from China and Indonesia in the U.S.”
The following schedule details key performance and cost metrics for the third quarter:
Third Quarter
————-
2009 2008
—- —-
Coated paper sales volume – 000s tons 708 893
Price per ton of coated paper $891 $1,005
Market downtime – 000s tons 101 13
Maintenance expense – $million $66 $94
Gross margin % 0.8% 8.1%
SG&A expense – $million $47 $62
Interest expense (including refinancing
effects of $133 million) – $million $194 $69
“In an effort to balance supply with demand, we took 101,000 tons of market-related downtime during the third quarter of 2009 and have announced that we intend to take up to an additional 160,000 tons of market-related downtime in the fourth quarter of 2009,” said Willett.
While dealing with lower revenues and market-related downtime described above, NewPage has continued to increase productivity, completed its integration efforts, and reduced input costs. “In this environment, continued improvements in our cost position are critical, and our continued successes in the Lean Six Sigma culture change, as well as a very successful new initiative in strategic sourcing, are helping us deal with the impact of significant market downtime and lower prices. In addition, now that we have completed our integration activities, we can be increasingly focused on making significant improvements in our overall customer experience,” added Willett.
As previously reported, the U.S. Internal Revenue Code allows a refundable excise tax credit for alternative fuel mixtures produced for sale or for use as a fuel in a trade or business. NewPage received payments of $86 million during the third quarter of 2009. Income recognized for the credit is included in net income (loss) attributable to the company and totaled $94 million for the third quarter of 2009.
NewPage closed the quarter with $235 million of liquidity, consisting of $11 million of cash and cash equivalents and $224 million of additional borrowing availability under the revolving credit facility. The amount available under the revolving credit facility takes into consideration the requirement to maintain a minimum availability of $50 million through March 2011 that was added as part of the amendment to the revolving credit facility in September 2009.
David J. Prystash, Senior Vice President and Chief Financial Officer for NewPage comments, “During the third quarter we significantly reduced discretionary spending and completed our private placement notes offering to sustain our business during these challenging economic conditions. For our employees, vendors and customers, these actions are critical steps in stabilizing our capital structure and improving our operational flexibility.” The net proceeds of the notes offering, together with approximately $5 million of borrowings under NewPage’s revolving credit facility, were used to repay all amounts outstanding under the NewPage term loan and to pay fees and expenses of the notes offering.