Post on 19-Jan-2016
2Q 2010 Earnings Call
August 5, 2010
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This presentation may contain “forward-looking statements” as that term is defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include without limitation any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “intend,” “project,” “plan,” “will likely continue,” “will likely result,” or words or phrases with similar meaning. Forward-looking statements involve risks and uncertainties, including without limitation economic, competitive, governmental and technological factors outside of our control, that may cause our business, strategy or actual results to differ materially from the forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements include without limitation:
The Company does not intend, and undertakes no obligation, to update any forward-looking statements.
Our substantial level of indebtedness Changes in the supply of, demand for, or prices of our products General economic and business conditions in the United States and Canada and elsewhere The ability of our customers to continue as a going concern, including our ability to collect accounts
receivable according to customary business terms The activities of competitors, including those that may be engaged in unfair trade practices Changes in significant operating expenses, including raw material and energy costs Changes in currency exchange rates Changes in the availability of capital Changes in the regulatory environment, including requirements for enhanced environmental
compliance Other risks and uncertainties detailed in our filings with the Securities and Exchange Commission
Forward-Looking StatementsForward-Looking Statements
George Martin President and Chief Executive Officer
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0
500
1000
1500
2000
2500
3000
3500
Q178
Q478
Q379
Q280
Q181
Q481
Q382
Q283
Q184
Q484
Q385
Q286
Q187
Q487
Q388
Q289
Q190
Q490
Q391
Q292
Q193
Q493
Q394
Q295
Q196
Q496
Q397
Q298
Q199
Q499
Q300
Q201
Q102
Q402
Q303
Q204
Q105
Q405
Q306
Q207
Q108
Q408
Q309
Q210e
Sales and Capacity Have Both Declined Since 2007Sales and Capacity Have Both Declined Since 2007
= Recession= Recession
Recovery Period “Peak to Peak”
(Months)
Source: RISI North American Graphic Paper Quarterly Historical Data, 2Q10 estimate using AF&PA Stats July 2010
Note: Coated sales = US coated paper shipments plus imports less exports
1978 to 2Q10 US Coated Paper Sales QuarterlyVolume
‘000 tons ’85 – ‘86 ’90 – ‘91 ’95 – ‘97 ’01 – ‘03 ’07 – ‘09
US Coated Sales US Capacity
(13)%
(7)%(19)%
(12)%
(34)%
5
99%
70%
92%96%
104%101%
Jan-08
Feb-08
Mar-08
Apr-08
May-08
Jun-08
Jul-08
Aug-08
Sep-08
Oct-08
Nov-08
Dec-08
Jan-09
Feb-09
Mar-09
Apr-09
May-09
Jun-09
Jul-09
Aug-09
Sep-09
Oct-09
Nov-09
Dec-09
Jan-10
Feb-10
Mar-10
Apr-10
May-10
Industry Capacity utilization levels now exceed 100%
US Coated Paper Utilization RatesUS Coated Paper Utilization Rates
90% Utilization Rate Mill Inventory Reductions Drive Utilization Over
100%
Source: RISI Paper Trader
Note: Utilization = US mill sales divided by US mill capacity
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NewPage Total Volume – Current Trends NewPage Total Volume – Current Trends
2Q10 volume up 29% year over year and up 8% against prior quarter
1 February sales per day normalized to 31 day month
787
1,030
1Q09 1Q10
Up 31%
(Tons in 000s)
864
1,116
2Q09 2Q10
Up 29%
Up 8%
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CFS & CGW ShipmentsCFS & CGW Shipments
NewPage volume growth continues to outpace the industry
Source: July 2010 RISI Paper Trader; Non seasonally adjusted CFS and CGW shipments
NewPage
588
744
601
831
2009 2010
(Tons in 000s)
1,552
1,899
1,570
1,989
2009 2010
2Q10 vs 2Q09Up 38%
Industry
2Q10 vs 2Q09Up 27%
1Q 2Q 1Q 2Q 1Q 2Q 1Q 2Q
2Q10 vs1Q10Up 12%
2Q10 vs1Q10Up 5%
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Data source: PPPC & AF&PA
Last Data Point: May 10
0.8
1.2
1.6
2.0
2.4
2.8
3.2
2003 2004 2005 2006 2007 2008 2009 2010
10
15
20
25
30
35
40
North American Mills Paper Inventory North American Mills Paper Inventory
Mill inventory days on hand at lows since 2003 …
9 days on hand lower than a year ago … a 28% decrease
Million Tons Days of SupplyTons on Hand
Days of Supply
9
225
300
375
450
525
600
675
750
825
900
150
200
250
300
350
400
450
500
550
600
Printer and Merchant InventoriesPrinter and Merchant Inventories
Source: 1IDE Alliance2 AF&PA
646,000 Tons 5 -year average
Inventories remain at historic lows
Printer Inventory1
CFS & CGWMerchant CFS Inventory2
(Tons in 000s) (Tons in 000s)
Down (46)%From3Q08Peak
Down (28)%From 1Q08 Peak458,000 Tons 5 -year average
*Note: 2010-Q2 based on April and May data only
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End User EnvironmentEnd User Environment
Both ad pages & commercial printing demand increasing
(30)%
(25)%
(20)%
(15)%
(10)%
(5)%
0%
5%
10%
Jan
-09
Mar
-09
May
-09
Jul-
09
Sep
-09
No
v-09
Jan
-10
Mar
-10
May
-10
Source: Media Industry Newsletter
Monthlies Ad Pages …
Up 7.9% June 2010 Year Over Year
% c
hang
e ye
ar o
ver
year
0.70
0.72
0.74
0.76
0.78
0.80
0.82
0.84
0.86
0.88
Jan
-09
Mar
-09
May
-09
Jul-
09
Sep
-09
No
v-09
Jan
-10
Mar
-10
May
-10
Source: RISI June 2010 Paper Trader
Commercial Printing & Support …
Up Since Low Point In March 2010
Dem
and
Inde
x; 2
007
=
1
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SummarySummary
Realized volume improvement as NewPage CFS & CGW shipments are up 38% year-over-year and industry volume has improved 27% over the same period
Inventories throughout the supply chain remain very low and utilization rates are now over 100%
End use demand improving … ad pages, commercial print and educational book demand up year-over-year
We have announced price increases effective 3Q 2010, reflecting higher demand, improved utilization and input cost recovery
David PrystashSenior Vice President & Chief Financial Officer
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2Q09 1Q10 2Q102Q10 vs.
2Q09Fav. (Unfav.)
2Q10 vs. 1Q10Fav. (Unfav.)
Net Sales ($MM) $736 $817 $890 21% 9%
Total VolumeCore Paper Volume(000s short tons)
864689
1,030792
1,116868
29%26%
8%10%
Core Paper Price($/short ton)
$928 $858 $852 (8)% (1)%
Mix Adjusted Core Paper Price $858 $860 -
Market Downtime Tons (000s)- Expense ($MM)
161$40*
39$7*
--
161$40
39$7
Total Cost Productivity/Other n/a n/a n/a $20MM $12MM
Total Cost Deflation/(Inflation) ($MM) n/a n/a n/a $(18) $(9)
Adj. EBITDA ($MM) $149 $15 $10 $(139) $(5)
Capital Expenditures ($MM) $16 $11 $20 $(4) $(9)
Available Liquidity** ($MM) $288 $247 $120** $(168) $(127)
Net Debt*** ($MM) $2,963 $3,037 $3,185 $(222) $(148)
2Q10 Key Metrics2Q10 Key Metrics
* 2Q 2009 includes pulp downtime of $8MM; 1Q 2010 includes pulp downtime of $0.4MM** Available liquidity = cash + available revolver balance; Amount would be $163MM without consideration of $50MM minimum availability requirement*** Net Debt = Total debt less cash
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EBITDA – 2Q 2010 vs. 1Q 2010EBITDA – 2Q 2010 vs. 1Q 2010
$ Millions
See reconciliation between Adjusted EBITDA and net loss attributable to the company in appendix
10
(10)
(14)
34
0 26
1 5
9
2
(13) 15
(9)
1Q10 Adj.EBITDA
Alt. Fuel TaxCredit
1Q10 Adj.EBITDA exc'dAlt. Fuel Tax
Credit
Price Volume Basis Wt./Downtime
Total CostProductivity
excl'dIncrementalMaintenance
Expense
SG&A Inflation 2Q10 Adj.EBITDA
exc'dMaintence
andSeverance
IncrementalMaintenance
Expense
Severance 2Q10 Adj.EBITDA
12Total Cost Productivity
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EBITDA – 2Q 2010 vs. 2Q 2009EBITDA – 2Q 2010 vs. 2Q 2009
$ Millions
See reconciliation between Adjusted EBITDA and net loss attributable to the company in appendix
10 (10) 20
(18)
0
(70)
48
11 29
(120)
149 15134
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2Q09 DCEBITDA
LIFOAdjustment
2Q09 Adj.EBITDA
Alt. Fuel Tax Credit
2Q09 Adj.EBITDA
excl'd Alt.Fuel TaxCredit
Volume Basis Wt./Downtime
Price Total Cost
Productivity
SG&A Inflation 2Q10 Adj.EBITDA
exc'dSeverance
Severance 2Q10 Adj.EBITDA
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Key Working Capital ComponentsKey Working Capital Components
1Q 2010
($MM)
1Q 2010Days2
2Q 2010
($MM)
2Q 2010Days2
Accounts Receivable $254 31 $296 28
Inventory $592 64 $552 57
Accounts Payable1 $(195) 27 $(240) 28
¹ Does not include accrued expenses and other liabilities
² Days are calculated using current and prior quarter’s actual average along with current quarter COGS (INV), current quarter COGP less DD&A (AP) or current quarter Sales (AR)
Accounts Receivable– Days outstanding improved by three days
Inventory– Reduced finished goods inventory
Accounts Payable– Days payable increased by one day. Balance increase primarily related to higher
production levels and related purchases.
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2Q10 Adj. EBITDA to Total Cash Generated2Q10 Adj. EBITDA to Total Cash Generated
($MM) 2Q 2010
Adjusted EBITDA $10
+ Working capital* $43
+ Other assets/liabilities $(10)
Cash flow from operations excluding interest $43
- Cash paid for interest $(166)
Cash flows from operating activities $(123)
- Capital expenditures $(20)
Free cash flow (used) $(143)
* Working capital comprised of accounts receivable, inventory and accounts payable
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($MM) March 31,
2010
June 30,
2010
Revolver Borrowing Base $374 $392
- Balance Drawn $0 $136
- Letters of Credit $90 $93
- Minimum Availability Required $50 $50
Remaining Availability $234 $113
Cash $13 $7
Available Liquidity * $247 $120
Treasury: LiquidityTreasury: Liquidity
* Available liquidity = cash + available revolver balance; Amount at June 30, 2010 would be $170MM without consideration of $50MM minimum availability requirement
Continue to pursue monetization of nonstrategic assets
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A replay of the call can be accessed via telephone (888) 266-2081 (toll-free domestic) or (703) 925-2533 (international), access code 1413360. The replay will be available starting at 2 p.m. (ET) on August 5, 2010 and will remain available until midnight (ET) on September 9, 2010.
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Appendix
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Reconciliation of Net Income (Loss) to EBITDAReconciliation of Net Income (Loss) to EBITDA
1 EBITDA and Adjusted EBITDA are not measures of our performance under accounting principles generally accepted in the United States (“GAAP”), are not intended to represent net income (loss) attributable to NewPage, and should not be used as an alternative to net income (loss) attributable to NewPage as an indicator of performance. EBITDA and Adjusted EBITDA are shown because they are a primary component of certain covenants under our revolving senior secured credit facility and are a basis upon which our management assesses performance. In addition, our management believes EBITDA and Adjusted EBITDA are useful to investors because they and similar measures are frequently used by securities analysts, investors and other interested parties in the evaluation of companies with substantial financial leverage. The use of EBITDA and Adjusted EBITDA instead of net income (loss) attributable to NewPage have limitations as an analytical tool, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP.
($MM) 2Q 2009 1Q 2010 2Q 2010
Net income (loss) attributable to NewPage
$(6) $(175) $(174)
Income tax expense (benefit) $(7) $0 $1
Interest expense $67 $97 $92
Depreciation and amortization $69 $68 $67
EBITDA1 $123 $(10) $(14)
Other adjustments $262 $253 $244
Adjusted EBITDA1 $149 $15 $10
2 Integration and related severance $10MM, equity award $3MM, pension expense $13MM3 (Gain) loss on disposal and impairment of assets $6MM, equity award expense $8MM, pension expense $9MM, other non-cash costs $2MM4 (Gain) loss on disposal of assets $2MM, equity award expense $11MM, pension expense $8MM, integration and related severance costs $2MM, other non-cash costs $1MM
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Historic Volume and Price TrendsHistoric Volume and Price Trends
1Q08 2Q08 3Q08 4Q08 1Q09 2Q09 3Q09 4Q09 1Q10 2Q10Volume (000's Tons)Core Paper Volume 1,183 1,013 1,026 883 668 689 769 823 792 868Total 1,306 1,133 1,178 1,039 787 864 966 1,069 1,030 1,116
Price ($/short ton)Core Paper Price $931 $961 $988 $983 $965 $928 $886 $873 $858 $852
2005 2006 2007 2008 2009Volume (000's Tons)Core Paper Volume 1,868 2,003 2,143 4,105 2,949Total 2,227 2,374 2,524 4,656 3,686
Price ($/short ton)Core Paper Price $891 $909 $901 $964 $910
(a) We acquired the printing and writing papers business of MeadWestvaco Corporation effective as of April 30, 2005. The data includes the combined results of the predecessor and successor.
(b) We acquired Stora Enso North America Inc. as of December 21, 2007. The data includes the results from the date of acquisition.
(a) (b)