Verso Paper Corp. Click to edit Master title style. J.P. Morgan Global High Yield and Leveraged Finance Conference.

Transcription

1 Click to edit Master title style Verso Paper Corp. J.P. Morgan 2013 Global High Yield and Leveraged Finance Conference February 26, 2013

2 Forward-Looking Statements Click to edit Master title style In this presentation, all statements that are not purely historical facts are forward-looking statements within the meaning of Section 27A Second of the Securities level Act of 1933 and Section 21E of the Securities Exchange Act of Forward-looking statements may be identified by the words believe, expect, anticipate, project, plan, estimate, Fourth level intend and similar expressions. Forward-looking statements are based on currently available business, economic, financial and other information and reflect management s current beliefs, expectations and views with respect to future developments and their potential effects on Verso. Actual results could vary materially depending on risks and uncertainties that may affect Verso and its business. For a discussion of such risks and uncertainties, please refer to Verso s filings with the Securities and Exchange Commission. Verso assumes no obligation to update any forward-looking statement made in this presentation to reflect subsequent events or circumstances or actual outcomes. 2

3 Click to edit Master title style Leading North American Coated Paper Producer Three strategically located paper mills with 1.4 million tons (1) of total paper capacity Market leader in coated paper for catalogs and magazines Vertically integrated pulp producer with 270,000 tons of pulp sold to third parties Market Leader in End User Segments (2)(3) Inserts 5% Other 11% Catalogs 37% Focused on Two Paper Grades (2)(3) Other 11% Commercial Print 22% Coated Freesheet 38% Coated Groundwood 51% Low Cost Producer Magazines 25% (1) 2012 Proforma excludes closure of the Sartell mill. (2) Excludes pulp sales. (3) Segment breakdown for 2012 Proforma excluding closure of the Sartell mill. 3

4 Strategically Located Facilities Cost-effective access to northern softwood fiber required for production of lightweight coated groundwood Northern Softwood Fiber Belt Bucksport Mill Grade Capacity CGW 350,000 Spec/Uncoat 55,000 Sartell Mill Quinnesec Mill Grade Capacity CFS 425,000 Kraft Pulp 485,000 Verso Mill Locations Key Printer Facilities Androscoggin Mill Grade Capacity CGW 355,000 CFS 175,000 Kraft Pulp 445,000 Spec/Uncoat 105,000 Total Grade Capacity CGW 705,000 CFS 600,000 Spec/Uncoat 160,000 Total Paper 1,465,000 Kraft Pulp 930,000 4

5 Operational Strategic Financial Verso Update Click to edit Master title style - Recent exchange offer of HoldCo TL that matured February Approximately $930 million of maturities pushed back to 2019; average maturity profile pushed out to ABL/Cash Flow Revolver termed out to Liquidity in good shape; aiming to complete Sartell Mill-site and Fiber Farms sales in Q113; expect $15 million government energy grant in early Uncompetitive assets representing over 400,000 tons shutdown remaining assets low cost and/or have flexible production capabilities - Full slate of cost savings initiatives (Rgap) primarily with productivity and direct cost improvements - Successfully completed key energy savings projects; 2013 Capex comparable to 2012 levels - Recent refinancing allows us to participate in expected industry M&A activities - Capital plans focused on production flexibility and cost improvement - Continued focus on non-traditional markets of label/release, flexible packaging and technical papers - Leveraging energy platform 5

6 Low Cost Manufacturing Footprint Click to edit Master title style In our key product areas, Ultra Lightweight #5 and #3 CFS, Verso enjoys a distinct manufacturing cost advantage vs. the competition Coated Freesheet Cost #3 #3 Ultra Lightweight #5 ($ per ton) $572 $637 Coated Groundwood Cost ($ per ton) $574 $631 Verso Peer Average Verso Peer Average Source: Fisher International, Inc. Note: Cash costs as of Q USD / CAD exchange rate at $1.003; Peer average excludes Verso; Averages are volume weighted. CFS costs from Fisher have been adjusted to reflect internally generated softwood at Quinnesec 6

7 Diversified Click to Direct edit Master and Indirect title style Spending Insulates Against Cost Variability Indirects * (29%) Distribution 9% Repairs 8% Other 12% Wood Fiber 16% Purchased Pulp 9% Raw Materials (71%) Labor 12% Chemicals 24% Energy 10% Flexible and Well-Invested Mills Optimize Raw Material Usage *Includes distribution, overhead, & other mill fixed/ other costs of sales 7

8 Demand Click to headwinds edit Master continued title style in 2012 Industry (RISI) CFS CGW US Apparent Consumption -4.6% +0.9% US Shipments -2.5% -5.2% No. 3, 60# Price -2.3% No. 5, 34# Price -2.1% Key Drivers: Sluggish GDP growth High Unemployment Struggling Consumer Confidence Proliferation of Digital Media Options & Media Fragmentation 8

9 Magazine Ad Pages -7.2% in Q4 12; -8.2% FY % 5.00% 0.00% -5.00% % % % % % Click to edit Master title style Catalogs Mailed +0.7% in Q3 12 Source: Publishers Information Bureau 6,000 5,000 4,000 3,000 2,000 1,000 (0) 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% -20.0% Catalogs Mailed (Millions) % CHYA 9

10 However, over 3.0 million tons of global coated capacity shutdown, indefinitely idled or repositioned in 2011/2012 Click to edit Master title style Company Mill Location Capacity (Short Tons) NORTH AMERICA NewPage Stevens Point, WI (Whiting) Effective Date Description (247,000) February 2011 Mill closure; produced 30-50# No. 4 & No. 5 on 2PMs Verso Bucksport, ME (90,000) October 2011 Permanent shutdown of PM2 Smart Papers Hamilton, OH (42,000) February 2012 Shut last CFS PM at mill Resolute Catawba, SC (150,000) June 2012 PM 1 shut indefinitely Verso Sartell, MN (180,000) August 2012 Mill closure following May 12 explosion & fire EUROPE Holmen Madrid, Spain (187,000) March 2011 Idled PM61; primarily produced LWC SAPPI Biberist, Switzerland (479,000) May-July 2011 Shut PM8 in May & PM9 in July; produced CFS UPM Anjalankoski, Finland (232,000) December 2011 Mill Closure. PM4 produced LWC M-Real Aanekoski, Finland (220,000) December 2011 Shut PM2; 60K tons to be transferred to Husum mill in 2012 UPM Albbruck, Germany (353,000) January 2012 Mill Closure. No. 5 CGW Norske Skog Honefoss, Norway (Follum) (154,000) March 2012 Mill Closure. PM7 produced machine-finished CGW Burgo Avezzano, Italy (132,000) July 2012 Machine shutdown. PM1 produced CFS Stora Enso Uetersen, Germany (154,000) 2012 Gradual shift to specialties from CFS Arjowiggins Odense, Denmark (120,000) End of 2012 Mill Closure; PM7 produced UWF & CWF ASIA Oji Paper Fuji, Japan (143,000) April 2011 Shutdown of PM producing CFS & CGW Mitsubishi Hachinohe, Japan (161,000) December 2012 Indefinitely idled CFS machine Source: RISI, Fisher, PPPC, Published Reports 10

11 Click to edit Master title style. and operating rates remained, and are expected to remain, at approximately 90%+ Click US Coated to edit Groundwood Master text styles (Tons in millions) 89% 81% % 96% 96% 94% 93% (Tons in millions) 91% 82% US Coated Freesheet 94% 91% 89% 90% 90% E 2014E Shipments Operating rate E 2014E Shipments Operating rate Source: RISI 11

12 (000 Tons) (000 Tons) Resulting in mill inventories being managed at low Click levels to edit Master title style 700 Click to edit Master text styles J '11 CFS Mill Inventories F M A M J J A S O N D J '12 F M A M J J A S O N CGW Mill Inventories J'11 F M A M J J A S O N D J '12 F M A M J J A S O N 0 Mill Inventories Days of Supply Source: AF&PA, RISI 12

13 Click to edit Master title style 2013 Demand Forecast indicates continuing demand challenges 2013 Demand Forecasts CFS CGW RISI (US) Released 11/12 PPPC (NA) Released 10/12-3.2% -6.2% -3.1% -5.2% Source: RISI, PPPC, Verso Marketing 13

14 Click to edit Master title style However, US Supply / Demand stay relatively in balance 000 Tons CFS CGW Supply 4,150 3,224 Demand 3,842 3,682 Difference +308 (458) Imports Operating Rate 1 92% 98% RISI Operating Rate 90% 93% 1 Based on Verso Demand assumptions and RISI Supply assumptions Source: Verso Marketing (Demand), RISI (Supply) 14

15 Verso Click Strategic to edit Master Energy title Summary style ($ in millions) Initiatives DOE 44 Area 3 Grant $21 12 projects across 3 Mills Quinnesec Renewable Energy Projects $45 Upgrade Biomass Delivery System Upgrade Combination Boiler New Turbine Generator Bucksport Renewable Energy Projects $42 Upgrade Biomass Handling System Modify Combination Boiler New Turbine Generator Energy RGAP $6 Total Capital $114 Government Grants ($36) NMTC Financing ($7) Net Capital $71 Initiatives to-date represent approximately ½ of Verso s energy strategy goal Achieved 81% of Save Energy Now goal 25% increase in consumption of renewable fuels 75% reduction in coal usage Internal generation increases by 36% Increase in biomass (carbon neutral) energy generation Incremental EBITDA $50 Verso Initiatives ROI (Pre-incentives) 44% Verso Initiatives ROI (Post-incentives) 71% Expected full run-rate by Q

16 Diverse and Flexible Energy Usage Profile Click to edit Master title style Energy transformation projects continue to increase usage of renewable energy Energy Consumption (1) (1) Based on 2012 energy consumption. 16

17 Our Click View to of edit 2013 Master title style Flat shipment volumes (considering closure of Sartell No. 3 paper machine); slow Click improvement to edit in Master the U.S. will text improve styles business conditions Average operating rates of 90% or higher Paper prices increasing as we move through the year Cost savings initiatives more than offset any cost or inflation increases Capital spending comparable to 2012 level Complete the sale of the Sartell Mill site and the Fiber Farm early in the year Working capital flat with 2012 level End year with liquidity remaining above $200 million Capacity closures and industry consolidation likely will continue 17

18 Click Key Strategies to edit Master for 2013 title style Optimize Verso s system despite continued decline of core markets Transform company into a diversified supplier of Printing & Writing and Specialty Papers Maintain a strategic position in traditional Magazine, Catalog and Retail segments based on price, mix, freight, etc. Grow incremental, system-favorable Commercial Print and Specialty Papers sales Sustain a heightened focus on controlling costs and maximizing profitability Improve operational efficiency Continue implementation of strategic energy strategy Proactively manage liquidity Maintain the Company s environmental sustainability profile 18

19 Recently completed exchange transaction for the Senior Unsecured Holding Company Term Loan Click to edit Master title style In January, completed exchange offer for $85.8 million of loans under the Verso Paper Finance Holdings Inc. Credit Agreement maturing on Feb 1, 2013 into $72.9 million of 11.75% Senior Secured Notes due 2019 $272 $418 $50 $396 $13 $143 $ nd Priority FRN Sr Subordinated Notes Cash Flow Revolver ABL Facility Secured Notes (1.5 Lien) 1 st Priority Sr Secured Notes 2 nd Priority Sr Secured Notes 19

20 Verso s Strengths Click to edit Master title style Commitment to produce to demand; new product development expertise Adequate liquidity, long-dated maturity profile and good free cash flow generating potential Capital discipline and solid infrastructure Diversified cost structure insulates against cost variability; proven world-class cost savings program (R-Gap) Flexible energy profile and alternative fuel opportunities Significant upside relative to market upturn; $40/ton price increase equates to $60 million EBITDA contribution Indemnity from legacy pension, environmental or legal issues 20

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